Morgan Stanley Resurgence; Recruiting Wars Refreshed, And Brokers Responding To Their ‘Pure Play’

Morgan Stanley is somewhat like a well-known female celebrity. Let’s use Britany Spears for this particular analogy. Yeah, that sounds about right.

At times looking and sounding like the ‘bell of the ball’ (as PG as we can put it), then losing its way and turning into cringe worthy headlines, getting caught with its pants down (protocol exit), shaving its head (misguided comp changes), then back to prominence again after shedding a little weight and basking in the glow of Vegas black lights and tight fitting clothes.

Over the past several months we’ve seen large teams from UBS, Wells Fargo, and Merrill Lynch all join Morgan Stanley. Teams that have brought, collectively, billions in assets and tens of millions in revenue. So the makeover certainly is taking shape.

It certainly doesn’t hurt that Morgan Stanley has decided to be super aggressive in deal making with elite, tier one advisors and teams. When you include deferred compensation matching in a ‘deal of scale’ for the right team – the total number can stretch to nearly 400%.

A little math for context: A $4M team at 400% rings in at $16M. With at least half of that paid moments after you walk in the door and are handed your brand new Morgan Stanley business cards. And if you are a tough negotiator, that number could be $9M.

**Reminder: “…money talks and bullshit walks.”

The other attribute that seems to be weighing heavily on potential advisor moves to MS is a concept that mattered 15-20 years ago, and seems to be making a comeback: brand equity.

Morgan Stanley remains a name that matters to UHNW investors, entrepreneurs, and anyone with capital needs beyond run of the mill asset allocation and financial planning. Morgan Stanley resonates as a ‘pure play’ in an industry that continues to be in transition – with many competitors having a hard time figuring out what and who they are. Morgan Stanley doesn’t have that problem. To say it best, it’s ‘big boy’ investment banking and wealth management, pure and simple.

In fact, for once in a generation there principle investment banking rival, Goldman Sachs, is racing to play catch up in the wealth management arena. And GS is waaaaay behind. Morgan Stanley essentially has a 25 year head start in the HNW space. That matters to advisors who aren’t interested in the RIA/Independent space and are ready to ‘hit the bid’.

Morgan Stanley, surprisingly, ala Britany Spears, has found its sweet spot.

BofA Team That Left For Fieldpoint Private: “It isn’t going well, at all…”

Fieldpoint Private has remained an enigma in the wealth management world over the past five years. Loaded with former ‘name’ executives from wirehouses you’d think they would have accumulated significantly for recruiting wins and scale than they actually have. That hasn’t been the case.

Last month they announced the hiring of a private banking team from BofA. The headline was flashy and the asset number was north of $1.2B. Good for them. But as any good manager knows, the asset transfer is all that matters. Period. If you land a high profile team and they flop during their transition – you could be out of a job. (Given that Fieldpoint opened a new office in FL for this team, ouch).

What we’ve heard from two sources, one of them at Fieldpoint, is that the asset transfer process one month in, has been a disappointment. Without giving out actual numbers, so far the team is well below transferring 30% of assets from BofA. That is a threshold that is customarily met within the first two weeks of a ‘good’ transition.

“The pictures and the narrative were great, but so far so ‘not’ good. Some of us had reservations about bringing on a somewhat non-traditional private banking team, and it looks like those concerns were warranted. Clients are pretty tethered to the bank (BofA) and they’ve been harder to extract then what the team believed.” – a contact at Fieldpoint Private.

“It isn’t going well, at all – the transition. You often see this with private banking teams coming from large IB’s or traditional behemoths like BofA. Clients are so entrenched with proprietary products and loans that pulling them away is much more complicated than it looks on the surface. I’m sure Fieldpoint will keep pouring resources into this team and their success – but it hasn’t gone well, or to plan, so far.” – recruiter familiar with Fieldpoint in Florida.

This is the ugly underbelly of recruiting that doesn’t make it to the headlines. When a team *potentially flops the ROI on the deal that they received begins to become an albatross around the firms and managers neck. Their P&L is potentially wrecked for years to come – and ultimately someone gets fired.

The script is yet to be finished with the team (Marc Angle, Stacey Cole and Johnny Gibson, with client associate Tara Pioli) that left BofA for what seemed to be greener pastures at Fieldpoint. But the early returns are concerning.

Stifel’s Historic Recruiting Surge; The Man Behind The Firm’s Epic Pivot From Passive Recruiting To Two Years Of Domination

It isn’t a secret that Stifel has been on a recruiting tear. A run that stretches back two, maybe two and a half years. A massive pivot for the firm from being, at best, opportunistic with their recruit hires, to being methodical, and ultimately dominating the recruiting arbitrage game.

What do we mean by ‘recruiting arbitrage’ exactly? The recruits and assets that are brought into the firm versus current Stifel advisors that leave the firm. By that measure (and total AUM recruited in 2018/2019) Stifel is beating everyone. And they are doing it in a way that de-emphasizes the size of the recruiting check – while emphasizing culture. A difficult two-step in today’s wealth management environment and ‘seller’s market’.

Stifel currently competes with two firms for talent that can essentially offer recruits 500% deals. Wells Fargo and Rockefeller. Just go check their profiles on our recruiting page. Stifel’s numbers ring in at anywhere from 200% – 250%. Remarkable.

So what is the secret sauce? What, or who, is it that started and continued this historic surge for Stifel?

We could point to Stifel’s long-tenured and highly respected CEO, Ron Kruszewski, for starters. Ron has spent 25 years rocketing Stifel away from its one time contemporaries like Baird and Hilliard Lyons. Stifel no longer compares to either of those firms in any reasonable manner; rather they are a legitimate nationwide presence after building reputations of scale in research, wealth management, mergers and acquisitions, and banking. Ron has provided the leadership and vision for all of it.

But we are talking about a huge pivot in wealth management recruiting. A pivot that saw Stifel from having limited strategy to becoming the outright leader in net recruited assets across the industry in 2018 and 2019. That’s a really big deal.

So here’s the name you need to be acutely aware of (hired by Ron Kruszewski in early 2016) and the architect behind Stifel’s recruiting dominance that began in mid-2017… John Pierce.

John has a history of recruiting and management success across the industry that has spanned better than 25 years – first at Merrill Lynch, then at Ameriprise (building out there initial recruiting infrastructure), and now to eye-popping success at Stifel.

The numbers speak for themselves, as do a few of John’s colleagues, who we spoke to on background about the process and results that have followed him to Stifel. First the numbers:

Per media reports – Stifel recruited ‘net’ assets under management of +$17B in 2018. Stifel’s momentum and John’s implementation carried over into 2019 with an even stronger net assets year that rung the bell at +$19B. A tally that totaled nearly $36B in two years. Staggering for any firm, much less a firm that used to be categorized as a ‘regional’ with a passive interest in recruiting.

To be clear, Stifel has always had a culture of retention. They simply do not lose many advisors based on their culture and never changing comp grid. Those were attributes that John Pierce used to his and the firm’s advantage to really ramp up the narrative that proceeded this recruiting run. Smart move.

To back up those results here are a few comments from a couple individuals that have worked closely with John at Stifel over the past three years:

“John brought structure to what most of us were doing sort of ‘ad hoc’ out here in the field – and made us accountable. Some didn’t like it at first, as you can imagine, but we all needed a kick in the ass. Results matter, and putting together a formula that’s worked, nobody has any issues now.” – via a Stifel contact in Texas.

“I’d sum up John’s time at Stifel like this; tireless worker and committed to his process. And it has worked. If the process works there isn’t any real argument against it. He shook things up pretty good when he arrived, and was backed up by Ron (Kruszewski), so we knew this was for real. Following up the Barclay’s purchase with his hire was smart, really, really smart.” – via an east coast Stifel contact.

We spoke to a couple more Stifel contacts about the recruiting success and John Pierce’s leadership, and the responses were nearly the same as above. Results matter, and he has delivered.

It will be interesting to see how 2020 turns out as the wires are back in the game with out sized recruiting deals and an appetite to end their losing streaks. The difference is this though, it is much easier to sustain momentum and narrative in wealth management recruiting than it is to build it. Pierce and Stifel have a leg up on the coming wirehouse horde.

Wells Fargo CEO: Don’t Assume All Is Well, Significantly More Clean Up To Do

When newly minted Wells Fargo CEO, Charlie Scharf, embarked on his initial earnings call most analysts were hoping for rainbows and lollipops with respect to the firms brand and reputation recovery.

That is not what they got, and in fact Mr. Scharf went so far as to go the other direction, lowering expectations that the final shoe may not have yet dropped.

Per media reports:

“Wells Fargo CEO Charlie Scharf acknowledged at an earnings call with analysts in early January that mistakes of the past are still impacting the firm.”

“Wells Fargo made “terrible mistakes,” Scharf said in that call, referring to the bank’s long-running scandals and the ensuing scrutiny from regulators.”

“We have not yet met our own expectations or the expectations of others. We must do what’s necessary to put these issues behind us,” he said last month.”

A sobering monologue if there ever was one – but smart by Scharf to lower expectations over the short term. But we wonder, what does that mean for the wealth management division, and competitive recruiting?

Wells Fargo continues to have one of the largest deals on the street (approaching 500% when including a post deal/deal) and their recruiting has trended upwards over the past two quarters. It has become a ’50/50′ proposition in that most weekends advisors leave WF but the same amount with like-minded assets and revenue join.

If managers and WF recruiters were smart they would leverage Mr. Scharf’s comments as ‘smart leadership’ in convincing wirehouse competitive recruits to join the firm. Much the way UBS rebuilt its reputation ahead of competitors during the financial crisis with Bob McCann and Bob Mulholland – smart leadership.

When competing among all wirehouses that seemed to have started 2020 with a renewed vigor for recruiting – any advantage should be leveraged in every possible way.

UBS Recruiting Reax: Massive Legacy Merrill Lynch PWM Team Joins Swiss Ranks In North Carolina

UBS continues to work through several missteps over the past few months. Those issues have been well covered on this site and in other industry publications. With that backdrop UBS pulled off a stunner today – landing the biggest Merrill Lynch PWM team in North Carolina.

Wickham Cash Partners, as they’ve been known for decades at Merrill Lynch, claims $16.7M in annual revenue and nearly $11B in client assets. Those numbers should hold up exceptionally well at the end of the year when looking back at the biggest moves in the industry. It wouldn’t surprise us if it holds up as the biggest move in the industry all year; kudos to UBS for landing a 50 year legacy founding an advisor and team.

Per media reports:

“R. Mitchell Wickham and Gregory M. Cash joined UBS with 15 other advisors and support staff, UBS said in a press release.”

“The team, which had included founder Charles L. Wickham, Mitchell’s father, had been overseeing $10.8 billion in client assets, according to a person at UBS familiar with their practice, who also provided their production number. The elder Wickham will remain until August at Merrill, where he is participating in its book-transition program.”

“More than 80% of their assets and $6 million of their revenue came from clients of Merrill’s “money manager services” business, which provides custody and clearing for retail clients of family offices and money management firms, according to two other sources. The Wickham group began their search in May 2019 after Merrill, whose parent Bank of America is based in Charlotte, said it would close MMS, which is used by a very small number of Merrill brokers, by the end of 2020.”

Well that seems just a bit odd? The teams founding partner is remaining at Merrill Lynch to finish off an asset transition program? To be fair, Charles is more than 80 years old, so we doubt he’s been serving clients on a full-time basis for a while. Clearly his son and partners manage the bulk of the stated assets here.

Selectively going after ‘teams of scale’ seems to be UBS’ recruiting objective in 2020. And Merrill remains ripe for the picking. Still, we expect both Merrill and UBS to be among the biggest net losers of advisors this year. Continued unrest in response to policy changes will send advisors elsewhere.

These type of headlines will be the norm this year, not the exception.

JP Morgan Whale Caught! First Republic Lands Biggest JPM Team In Florida

We told you to keep a sharp eye on this week and weekend. And we told you to be on the lookout for multiple J.P. Morgan Securities exits. Well, here you go.

First Republic just landed a monster team in Florida. Per media reports:

”Salvatore Tiano, who spent all one year of his 30-year career at J.P. Morgan Securities and its Bear, Stearns Securities predecessor, the team includes six advisors and four support staffers who work with $2.5 billion of client assets.”

”Mr. Tiano  ranked #2 on Forbes’ list of top Sunshine State advisors in 2019 (and #54 nationally), and works with many “dot-com era public executives.”

”The group, which was based at a J.P. Morgan office in Palm Beach, are the first wealth managers to join First Republic private bankers in its Jupiter, Fla., branch.”

The spicket has officially been turned on and the ‘outflow’ at JPMS is expected. Multiple recruiters believe that there will be significant attrition at the firm this year – and this move is a testament to that.

First Republic, in conversations with recruiters, is set to get slightly more aggressive in wooing some of the largest teams in the space this year. They will need all the aggressiveness they can muster with Morgan Stanley and Wells Fargo at full tilt on the trail once again.

Again, there are more moves to come and announcements to be made. Q1 is shaping up as an epic one.

Morgan Stanley Crushes Earnings Expectations; Wealth Management Outperforms, Profit Margin Pushes Past 27%

Morgan Stanley is moving today, and it has its wealth management division to thank. In two short years executives at the firm have pushed profit margins from roughly 20% in the division, to better than 27% – a number that most thought would take a couple more years to manufacture.

Now, the next profit margin goal has been set by James Gorman – 30%. And all of this as the firm returns to aggressively recruiting large advisors and advisor teams.

Via media reports:

“We delivered strong quarterly earnings across all of our businesses,” CEO James Gorman said in the release. “Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income. This consistent performance met all of our stated performance targets.”

Whether good or bad, Morgan Stanley is seen as the purest play in wealth management amongst advisors. It no longer competes with Merrill Lynch in a meaningful way as the ‘whimpering herd’ has been nurtured by Bank of America.

Advisor attrition has slowed based on the firms protocol exit strategy. It seems that the policy is working dramatically better at Morgan Stanley than UBS. And the recently announced comp grid adjustments seem far less obtrusive than those announced by UBS as well.

One manager we spoke to at the firm this AM said the following about the current state of attitudes amongst advisors: “I’d say it’s a 60/40 proposition. 60% are happy with the current trajectory of the firm, and 40% are lukewarm. Some still hold Smith Barney grudges and there isn’t much that can be done about that. But this is a place where the headline on your business card still is a net positive in attracting clients and assets. Most advisors get it.”

Morgan Stanley is in a generally good spot in relation to its wirehouse competition. Of course, that’s a category rife with long term issues, but for today they can bask in the glow of beating earnings expectations.

Rockefeller Lands ATL Whale; Morgan Stanley Team Moves $2B Practice To Fast Rising Firm

Rockefeller was a net winner in recruiting and brand reputation in 2019. Drama free and very selective with their hires (money center cities, large AUM base, annual revenue of scale), Rockefeller pushed into the spotlight throughout most of last year.

That has continued in 2020 as they’ve already started with a huge hire – stealing away on of the biggest teams in all of Atlanta, via a recruiting source on Friday:

“Rockefeller Capital acquires The Merlin Wealth Management team from Morgan Stanley in Atlanta. Michael Merlin leaves Morgan after 10 years with over a decade spent at Citigroup prior to joining Morgan. The team’s production was approximately $8 million, managing approximately $2 billion in assets. This is yet another great acquisition for Rockefeller Capital.”
Rockefeller put together several deals like this in 2019 and has made it a clear and central part of their business plan moving forward. It is reminiscent of the early days of HighTower, albeit with a more clear cut and traditional grid and employee based acquisition structure. Still, the similarities are out there.The Merlin Wealth Management Group declined to comment on their transition, but via recruiting contacts familiar with the firm they were “run down by the bureaucracy of Morgan Stanley and its ever growing complexity and lack of responsiveness to team needs, juxtaposed against the protocol exit.”

That response and feedback doesn’t surprise – and could be mapped over just about any exit from a traditional wirehouse these days. Teams want deeper – whether legally real or perceived – control of their practice on a daily and long term basis. The scale and exclusivity of Rockefeller seems to give the folks at the Merlin Group just that… so they hit the bid.

As a bit of a  teaser, we expect several more of these high level announcements to be coming from Rockefeller over the next several weeks. Stay tuned.

Wells Fargo: “You want a 550% recruiting deal? Come right this way…”

Wells Fargo announced today that they will continue, in perpetuity, the largest recruiting deals on the street. They also reiterated their commitment to significantly reward recruiters for pushing valuable recruits to their multiplicity of platforms with increased recruiting fees that dwarf the industry standard.

Wells Fargo just extended the holiday season for eligible advisors, teams, and recruiters. But there is a bit more to the story that hasn’t been put out into the media over the past year that will grab your attention:

If you are a Tier 1, experienced advisor the actual top end potential with an end of contract kicker is 550%. Yes, you just read that right. 550%. One more time for effect: 550%

How does Wells Fargo get there for its employee channel recruits? First, it offers the aforementioned ‘traditional’ deal structure attached to a 9 year forgivable loan/contract. Then WF decides to add the real sweetener and offers Tier 1 advisors the option to sell their book within the Wells Fargo ecosystem for a stated and committed 225%.

Bam! Pop! Bang!

So if you are a 55 year old advisor at Merill Lynch with a partner, a junior advisor, and two client service associates doing $3m in annual revenue, do a little math. Why don’t we do a little math for you: that’s $16,500,00.00. Take another look at that number.

Meanwhile, with an ongoing recruiter payout that sits at 10% versus the industry standard of 6% – your friendly neighbor recruiter is HIGHLY incentivized to convince you to hit the mf’ing bid!

Take a look at a couple of teams that did just that late last year:

“In December, a five-broker Merrill team in Plano, Texas with $4.5 million of annual revenue joined the “advisor-led” channel of standalone Wells Fargo Advisors offices, following a $4- million team from Morgan Stanley that joined in Boca Raton, Florida, in September.”

If those teams chose the aformentioned deal, their ‘all-in’ payouts are $22M and $24.75M. Eye popping numbers.

Expect Wells Fargo to not only stop the bleeding in 2020 – but to be a favored destination for UBS, Merrill Lynch, and Morgan Stanley advisors looking for comfortable surroundings and a ‘back the truck up’ load of liquidity.