A massive move occurred in the Pacific Northwest last week. The Phil Scott Group out of Merrill Lynch made the move to First Republic. The numerics surrounding the transaction are eye-popping all around and sent shockwaves through BofA/Merrill in that part of the country.
First, Mr. Scott was a 36 year veteran of Merrill Lynch an absolute ‘thundering herd’ lifer. He joined the firm out of the Naval Academy in 1984 and seemingly never considered leaving. That all changed last week. Chatter in Seattle and the surrounding wealth management organizations was abuzz given the largess of Mr. Scott and his team.
The numbers are just are even bigger than the surprise move: $18M in annual revenue and $2.7B in client assets under management. A huge win for First Republic in the region. Doing a little napkin math – the total deal for the team given the revenue stated above will climb beyond the $60M dollar mark. Wow.
Mr. Scott is a Barron’s ‘Hall of Fame’ advisor and his Barron’s team bio reads as such:
“Phil joined Merrill Lynch in 1984 after graduating from the U.S. Naval Academy with degrees in International Relations and General Engineering. His extended tenure with Merrill Lynch is paralleled by that of his team members, many of whom have collaborated with Mr. Scott for more than 15 years. That continuity and consistency, Phil believes, allows the team to deliver an exceptional client experience.”
Pulling back to 50,000 feet – the narrative continues for Merrill Lynch, as they lose yet another huge producer and capstone in a money center city. As has been occurring for a number of years now, the largest producers are leaving the firm at a clip never before seen at Merrill. Choosing a name like First Republic is of real interest; but maybe more so is the reality that a 36 year veteran of Merrill finally decided the firm was no longer his home.
John Anderson, director of practice management solutions at SEI, is all-in when it comes to
digital solutions. “Advisors no longer have to get in the car, drive to the office, find a place to
park, and sit in the office for hours,” he stated in a press release earlier this week.
SEI is trying to lead by example when it comes to digital engagement. They’ve implemented a
shorter meeting format for training and offer it exclusively online. They’ve even gone so far as
to replace the inhouse meal they previously offered with free UberEats delivery.
Surprisingly, many advisors turn down the free meal. UberEats offers that are not redeemed
are donated. SEI has given over $200,000 this year to local food banks.
“This is happening at a client level also,” Anderson claims. “Zoom and WebEx meetings are
shorter and more meaningful. Advisors now have the ability to set meetings where they’re not
just dumping data. They can be more engaging to their clients that way.”
It doesn’t stop there. The new mindset extends to recruiting. Prior to the pandemic, SEI did a
two-day in-house training seminar for new recruits. That’s been changed to a “Discovery Day”
that lasts sixty to ninety minutes in an online format.
For current advisors, SEI runs “Webinar Wednesdays,” offering practice management training
and planning tips for both brick and mortar and virtual advisors.
Schwab Offers Full Time Positions to Virtual Summer Interns
Like most financial firms, Schwab moved their summer internship program into virtual mode
this year. Elizabeth King, the SVP for enterprise learning and talent management, reports that 240 interns in over 130 cities went through the program this summer.
“Everyone’s been working in their kitchens and bedrooms,” King said in an interview with
Business Insider this week. “Many of these interns are aspiring seniors in college who will be
offered full-time jobs at Schwab in the upcoming weeks.”
According to Schwab policy, those offers should number over one hundred, roughly half of the
current class of their Intern Academy Program. The positions will be in finance, investor
services, corporate risk management, and technology.
Goldman Sachs Goes Virtual but shortens Internship Program
Goldman Sachs delayed their virtual internship program this summer, choosing to shorten the
program and start July 6th instead of back in June. It typically takes ten weeks of training, hands-on working, and networking with management to cultivate a top-quality analyst prospect.
With the abbreviated time frame and lack of personal contact, the Wall Street investment bank
is experiencing uncertainty over what the internship program will produce this year.
Citi also ran a shortened five-week virtual internship program this summer. Unlike Goldman,
they are being pro-active about hiring. Earlier this week, the bank guaranteed full-time offers to
interns in New York, London, Hong Kong, Singapore, and Tokyo.
Competing banks and private equity firms started much earlier and are also making hiring
decisions. Morgan Stanley was one of the first to offer a virtual summer internship this year.
“Once we realized what the timeline was for Covid-19, it was an easy decision,” stated Jeff
Brodsky, chief human resources officer at Morgan Stanley. “It’s all about execution now. We’re
preparing to make our full-time job offers in the next few weeks.”
Regional firms have been absolutely crushing it over the past 24 months.
Most prognosticators thought that the fiduciary rule and protocol exit disruptions would disproportionately positively affect independents and RIA aggregators. While those businesses have benefited, the boom has taken place in the halls of Stifel, Raymond James, RBC, Janney, and others.
To drill down a bit, three players have gathered assets like they’ve never done before: RBC, Stifel, and Raymond James.
Here are five reasons why it’s happening.
- Culture, culture, culture. Merrill Lynch was an advisor’s dream twenty years ago. Brand cache, a belief in the advisor as to the firm’s revenue center, stock stability and golden handcuffs, the ‘Thundering Herd’, and smart national marketing campaigns. Now, it’s an afterthought at Bank of America. Regional names now ‘feel’ like Merrill felt in the 90’s – entrepreneurial and collegial. Their opinions and client-focused businesses matter again. Culture.
- Recruiting deals at regionals are either equal to or larger than wirehouse deals. Just five years ago that simply wasn’t the case. Management at places like RBC saw an opening when UBS and Morgan Stanley decided to de-emphasize recruiting two years ago and reduce their recruiting deal numbers and stepped into the gap.
- Executive leadership. As wirehouses have seen significant churn amongst their leadership ranks, regionals have been ‘steady as she goes’. Furthermore, regional leadership has made smart moves and kept their powder dry with respect to the DOL fiduciary rules. They waited, wirehouses panicked.
- Demographics. As large scale, legacy teams are at the height of their earning power (and in the midst of a historic bull market), they are looking for a soft landing that won’t nip at their heels with new quotas connected to households, loans and checking accounts. Quotas that if not met take a chunk out of their grid payouts.
- Financial crisis residue remains. Wells Fargo is still fighting the stigma of a scandal that is two years old. Merrill is no longer Merrill. Nearly everyone took a big bailout. But regionals don’t even have a whiff of what remains of that stink. No bailouts, no ‘too big to fail’ documentary cameos. It is an easy sell to clients who previously may have questioned a move to a regional name. That question is gone, replaced by ‘could it happen again’ to legacy wirehouse firms.
Add it all up and you have legions of million-dollar producers taking VIP trips to RBC, Stifel, and Raymond James on the regular. And the pace doesn’t look like it’s about to slow. Every single quarter wirehouse headcount dwindles. No new narrative or bloated recruiting deal can compete with the reality of the above.
Regionals will continue to win.
After the departure of their national recruiting head, John Pierce, Stifel recruiting took a bit of a pause. As they circled the wagons they remained engaged with advisors that had been in the pipeline before Mr. Pierce’s departure and the fruits of those efforts have finally found their way to the firm. Via On Wall Street
“The largest of Stifel’s latest recruits is an ex-Merrill Lynch team that managed $935 million. It is composed of advisors Blase Sparma, Stephen Long Jr., Brad Ripplemeyer, and Hampton Ballard. They made the move last week and will staff a new Stifel office in Venice, Florida.”
“Sparma and Long had been at Merrill Lynch since starting their careers in 2000 and 2004, respectively, according to FINRA BrokerCheck records. Ripplemeyer began his advisory career at Smith Barney in 2000, moving to Merrill in 2012. Ballard has spent the entirety of his four-year career at Merrill.”
All in all, Stifel brought in $1.5B in client assets via their recruiting haul, adding several other advisors and teams to go along with the flagship group from Merrill Lynch.
Over the past four years, Stifel has feasted on Merrill Lynch’s legacy teams and advisors. This group adds to that batch of former Merrill Lynch faculty that now call Stifel home.
Beyond Merrill Lynch, Stifel also landed a sizable grouping of Wells Fargo talent across the country. Interestingly enough Wells Fargo has a sizable presence in St. Louis alongside Stifel – so a bit of hand to hand combat on the recruiting front.
Whether or not Stifel can keep up the pace that is set in 2018 and 2019 is yet to be seen, but $1.5B in recruited assets is a great start.