EXCLUSIVE: RBC Lands Massive Recruiting Win In SanFrancisco; Alliance Bernstein Head Of Family Offices, Bill Grayson, Takes $6M In Annual Revenue To New Firm

This one will grab a lot of eyeballs. Especially those that exist at Alliance Bernstein. Bill Grayson, National Director for Family Offices at Bernstein Private Wealth has migrated to RBC in San Francisco. He’s taking $6M in annual production and nearly $1B in client assets with him. An absolutely massive win for RBC in the SanFran market and for inquiring minds across the country. It also sends a signal that RBC is willing to wade into the deeper recruiting waters that is private banking and family offices so to speak.

Mr. Grayson has spent 11 years as Aliiance Berstein’s head of family offices after all manner of stints on different boards of distinction. Starting his career in the financial services industry at Montgomery Securities in 1996, he migrated to JP Morgan and eventually landed at Bernstein. He’s been pivotal in growing their wealth management footprint over the past decade, but decided the ‘structure’ (code for payout) wasn’t ultimately optimal.

As you can imagine the competition for Mr. Grayson’s services were fierce given the size of his practice, and the expected ‘tail’ that should follow him to his firm of choice. RBC won the day based on all sorts of factors, but local and national leadership all played a significant role.

More to come…

BREAKING: Morgan Stanley Star Bolts For Rockefeller; Atlanta Broker Brings $300M In Assets To New Location

Rockefeller has continued to consistently win recruiting battles with larger rivals over the past two years. One could make the claim that their strategy has been the most productive across the street by a wide margin. Specific to their success versus long entrenched wirehouses offering massive deals (Rockefeller’s deal is substantial as well)

That success continued this past Friday as a rising Morgan Stanley star migrated to Rockefeller in Atlanta. Brian Lusink snatched up his $1.55M in annual production and more than $300M in assets under management and trotted them over to Rockefeller’s new offices in Atlanta. We spoke to sources at Rockefeller about the move and they were pumped about the momentum that is building in places like Atlanta.

“The strategy continues to be national in scope and this is just another win that highlights that reality. The competition for advisors that are well established and have books that are continuing to grow is fierce. This particular win has much to do with our platform and the tech that we provide – specifically its depth and the ease of use versus our competition. We really like the advantages we have in the tech space and continue to invest in ways that we believe will keep us out front. And while we are talking, keep your eyes on movement in Texas.” – a source at Rockefeller on the condition of anonymity.

Mr. Lusink has been with Morgan Stanley nearly his entire career (better than 25 years) and the larger share of his practice focused on corportate retirement programs. His book grew out of his service to those retirement programs and should transfer to Rockefeller quickly because of those long-standing relationships.

Doing a little math – because that’s what we do here – the total cash register number on Mr. Lusink’s deal could top $4.5 million. A number that could be even a bit higher if Rockefeller popped for the deferred comp balances that Mr. Lusink is leaving behind at Morgan Stanley.

Finally, we continue to hear rumors of upcoming trades ‘of scale’ for Rockefeller in Texas and California. The minute they print we will be here to give you the details.


UBS Stalking Large Goldman Sachs Teams; Pushing Their Recruiting Deal Higher For GS Elite

Goldman Sachs wealth managers have traditionally been very difficult to pry away from the firm that they’ve spent nearly their entire career with. Beyond brand loyalty their have been a few well known reasons for the ‘stickiness’ of GS folks and their clients. Employee contracts, non-solicit and non-compete policies, and even garden leaves are trail of tears that follow Goldman Sachs advisors when they leave.

Still, the books they bring with them are some of the biggest on the street and are highly sought after. UBS has decided that the ask is worth the price and has decided to focus on recruiting Goldman Sachs teams in money-center cities across the US. And the deal they are offering is uniquely aggressive.

In speaking with a recruiting contact that is familiar with both firms, the deal was laid out for us… and under some circumstances could stretch beyond 500%. Yes, you read that right.

Per our contact:

”Here is the deal for guys at GS. It is between 250-275% (not including deferred) of production with a combo of upfront and back ends. Importantly, this is a guaranteed deal and they also offer members of the team to retire so the total deal computes out to 550%. Huge commitment by UBS.”

Huge commitment indeed. The numbers speak for themselves. Say you are a team founder and 50 years old, with an ya production of $6M. Doing a little ‘back of the napkin’ math and that’s better than $33M dollars over the final decade plus of your career. Not bad work if you can get it.

So yes, UBS has made a commitment to find and reel in Goldman Sachs teams; and clearly are happy to pay whatever price is needed to book em’.

EXCLUSIVE: JP Morgan Slashes Product Payouts, Hits Annuities Hardest

JP Morgan has decided to slash advisor payouts on some packaged products as of yesterday in a memo that was viewed by BrokerChalk and discussed with several advisors at the firm. The reduction in payouts hits annuities hardest as advisors have been told that they will receive 0% upfront fees on those products, and that the fee slashing hasn’t yet come to its end.

The discussion this morning focused on the memo and that JP Morgan is using the BI standard to reduce the payouts for advisors. The JP Morgan advisors that we spoke to simply arent buying it and are convinced that this is just another ploy for the bank to book profits amidst a pandemic, using the blood, sweat, and tears of their advisors to do it.

One advisor had this to say, “You are going from an up front commission of 4% to nothing. Not that variable annuities are the lion share of the product and work that I do, but it will make a dent in my numbers going forward. The bigger issue is that the cutting probably won’t stop here. The rumor is that there is more to come. If they use the BI bullshit to hack away further at what we earn, and you know we have reduced payouts here compared to the wires; people will leave.”

Annuities have remained in the regulatory cross-hairs for essentially a decade. Just ask Ken Fisher, who claims he’d rather die than sell an annuity (he’s got other issues at the moment). Still, they are heavily regulated, legal, and at times tax efficient useful places to stash client funds.

Deciding to cut the payouts on these products without any advance notice is just another slap in the face to the advisor that practices at JP Morgan; whatever channel of theirs you are stationed in. And we suspect that the next few fee cutting announcement from the firm will be met with similar angst.

Post Coronavirus: Could Protocol 2.0 Become A Reality (we keep hearing it)

Whispers are beginning to make their way to our big ears. The exit out of the broker protocol by the likes of UBS, Morgan Stanley and other large firms has been a disaster on several fronts.

Legal fees have skyrocketed, advisor exits haven’t meaningfully slowed, the reputations of the ‘prexit’ firms have taken a further beating, and recruiting deal are either at or beyond all-time highs (see: Wells Fargo).

The broker protocol exit was supposed to be the catalyst to greatly reduce advisor movement between Wall Street firms and adjust the recruiting loan/bonuses stuck on corporate balance sheets.

While some balance sheets have leveled off (UBS) others are growing. Advisors continue to exit and have found creative ways to communicate with clients and avoid the legal entanglements connected to non-solicit and non-compete language. Mobile apps like WeChat, Telegram, WhatsApp etc allow for ongoing conversations that are simply not searchable and provide legal cover.

Which leads us to conversations we’ve heard are making their way through US wealth management board rooms. Was exiting the broker protocol a mistake? And if they were to implement a ‘Broker Protocol 2.0’, what would it look like? 

It is likely that those talks have begun. The current environment isn’t working.

Using UBS as an example, instead of exiting the protocol altogether they could have (should have) just slowed recruiting to a crawl and went significantly upmarket. Which is essentially what they’ve done anyway.

It will be interesting what to make of Protocol 2.0. We expect it to take a while to take shape, but there is no doubt it is being discussed.


Indie Firms Fall Way Behind In Recruiting; And It’s Not Just About ‘Deal Size’, Blame Private Equity

It would be easy to explain away the slow finish and slow start (2019/2020) in recruiting for independents and RIA’s by citing the explosion in deal size at the wires and firms like First Republic and Rockefeller. But that is only part of the story, and frankly those dynamics generally existed most of last year when large teams trended towards the independent channel and away from ‘full service’ platforms.

So what is really going on here? What is the backdrop giving larger teams pause as they execute their due diligence and plan a move that will set the tone for the next two decades of their career. Why has the ‘hit the bid’ movement towards RIA’s and independent firms slowed waaaay down?

Two words: Private Equity.

In conversations with several notable experts in the RIA space, the private equity creep, and lack of transparency about why, what, and who owns significant pieces of big box RIA’s – it’s clear a conversation needs to be had about the ‘teeth’ private equity has sunk into the RIA movement.

Here is a piece of a conversation we had yesterday about the potential problems that private equity poses in the RIA space:

“It’s unclear how Rockefeller, Steward, Snowden, HighTower and others are going to shake out with professional private equity involved and the cloak and dagger term sheets they will never show recruits or anyone else- that’s what threw HighTower sideways a couple years back – the Preferred A convertible terms of second round of PE that had claws-even the management team was unaware of – it’s a major problem for any Independent firms offering equity – that have professional investors watching the clock and collecting a big coupon. Whereas First Republic and others are throwing around huge amounts of cash- add the big four are all back in the game – and Wells Fargo’s open pocketbook, indies will have a tougher year. Did I mention that the top recruiting firms are getting paid huge retainers and some are being paid 10%. Recently was told RJ has a new deal for recruiters paying them up to 10%.”

“Game is on like never before- LPL- 100%+ cash totally forgivable and now you have the big 3- Fidelity , Schwab and Pershing – actually uttering the words Transition Assistance- code name for forgivable recruiting deals- where just last year it was ‘Working Capital’. It’s extended as a repayable loan, at a fraction of the size. Indies will be and are being hit the hardest and will be forced into ‘rollup’ mode to survive- print that- put it in an envelope and open in 12-18 months – it will be news by then- not a observation or prediction.”

The details there are striking, but most important is the claim of a lack of transparency with recruits. And there’s the rub; recruits don’t want to sign on to a black box having know idea what there equity could be worth or diluted to in a couple years.

Another conversation went even deeper about the role of private equity in the independent space:

”So what’s happening with the term sheets is PE firms put in good lever and bad lever covenants. They miss goals set (higher the goals the higher the valuation, lower equity % at first to PE firm). But by agreeing to “reach goals” to give out less equity, they inevitably miss those lofty goals and pay dearly, bad levers are triggered, more equity, greater PE equity ownership, more control, possible reset higher on convertible note, comp/bonus cuts, additional board seats etc. It’s like the +400% recruiting deals, most firms know on average, with backend hurdles, etc, that they will only pay out 225% over a period of years. That’s how they set it up, knowing most will never see the full amount, Wall Street trick that has been used for decades, perfected by the wires. That same concept is now being used in the indie space, except on the corporate level.”

Read these quotes and do your homework folks. There are no free rides in finance and wealth management. If you take the big check and move to Morgan Stanley, you are making a deal with all manner of compromises. If you make a deal with a big box RIA (Steward Partners, Snowden, Focus, Dynasty, HighTower via merger or acquisition) you are also making some sort of compromise.

The choice is yours, but understand that the ‘purity’ of the indie trade isn’t what it used to be.

Continued Recruiting Aggression: Wells Fargo Deals Tick Higher Amidst Pandemic ‘Opportunity’

Whether you are an independent advisor, wirehouse advisor, bank broker, or any variation thereof; Wells Fargo wants to offer you a historic deal in the hopes that you will jump at the chance to take it. We’ve been privy to several Wells Fargo offers in the past two weeks and they are aggressive to say the least. Using the perceived opportunity to quickly transfer client assets in the midst of the realities of ‘shelter at home’ policies across the US – Wells Fargo has been more aggressive than anyone in recruiting advisors and deal making within wealth management of late.

We’ve routinely seen deals that press beyond the 335% – 350% number for wirehouse advisors of all sizes. Not just the top tier teams that Wells is chasing, but every wirehouse advisor that they sit in front of at the moment. Bank brokers are negotiating deals that are anywhere between 220% – 250% right now. Numbers that were absolutely unheard of in that channel just 18 months ago. The same aggressiveness is being deployed in their well known independent channel as well.

What is the thought process behind the push to ‘make it rain’ in the recruiting world right now? We spoke to two people in recruiting at Wells Fargo and came away with some answers.

“The timing is critical, and the news cycle is currently our friend, as opposed to an obvious nemesis. Instead of all eyes being focused on potential sins of the past, we can have conversations that are about the here and now, strength of the firms overall balance sheet, and the go forward plans of a shiny new management team.” – said a recruiter at the firm on condition of anonymity.

“Yes there is an obvious push – and it is directly correlated to what we see as an opening in advisors evaluation of this current crisis, the turmoil in the markets… every serious bear market has seen significant advisor movement over the past 30 years, so we’d rather be on the ready rather than chasing the rest of the field. Coming out of this, and whatever that looks like, our management team wants to be aggressive and proactive as is allowed within the industry. Deals are not going to be pulled back in anyway, with the caveat that if things get worse and a deeper recession than what is currently projected arrives, we will keep pressing forward. Opportunity doesn’t always announce itself, it has to be grabbed. We think that is what we are doing right now.” – a complex manager at Wells Fargo on the condition of anonymity.

Getting into the proverbial hive mind of Wells Fargo has been interesting over the past few days. How a bank of scale and one of the worlds largest wealth management organizations is using what looks to most to be a slowdown to pick up their recruiting efforts is compelling. Are they necessarily going against the grain? Maybe, maybe not. But one this is absolutely for sure – they are clearly committed to the path they are on.

Morgan Stanley Team Bolts For Ameriprise; Phelps Hamus Group Switches Jerseys In Wisconsin

And just as we suspected the recruiting wheel continues to turn and churn – with an interesting assist from the current events. A Morgan Stanley team left for Ameriprise in Madison, WI last Friday and took with them nearly $1.8M in annual revenue and better than $200M in client assets.

Ron Phelps founded the Phelps Hamus group at Morgan Stanley in 1996 and later added partner Jacob Hamus. Mr. Phelps is a Decorated Veteran of the United States Army and has even authored a children’s book, “The Stealth Dog”. Mr. Hamus started with Morgan Stanley as an intern in 2007 and became a full-time advisor in 2010. Together, with Senior Client Service Associate Wendy Campbell and Registered Client Service Associate Lyam Hunt – the team can claim better than 50 years of service in the world of wealth management.

It is unclear whether or not the Phelps Hamus Group chose the employee or independent channel at Ameriprise. The moment we have those details we will get them to you.

What is true and is of interest – given the timing of this move and the shutdown that exists across the country – they won’t be dealing with a TRO from Morgan Stanley anytime soon. With courts largely closed to anything but clear emergencies at this point the ability for Morgan Stanley attorneys to appear before a judge and be granted a TRO (based on the firms non-protocol status) is essentially zero.

As discussed at the end of one of our articles just yesterday, for advisors leaving non-protocol firms like Morgan Stanely, UBS, or J. P. Morgan the current legal climate works in their favor. Sure, the state of the markets and coronavirus itself are their own separate issues, but short-term this is a green light for some advisors.

Morgan Stanley Delays Comp Plan Changes To October 1; Could Extend To Year End

Morgan Stanley announced significiant changes to its compensation grid for financial advisors late last year. The significance was felt across the wealth management division as it was the first such change since 2017, and the changes were aggressive to the upside.

That was then, this is now.

The coronavirus pandemic, significantly roiled markets, what is assuredly a coming recession or at least a serious slow down in the economy – all of these factors have forced Morgan Stanley, and other firms to adjust their plans. As such, advisors are getting a reprieve from the increased production and household added levels. The reaction from advisors was a brief relief in the midst of a shit storm over the past three weeks. Many, though, were taken a bit aback by the news that the levels would be reinstated and expected to be passed by October 1.

Per media reports late Friday:

“The firm is delaying some forthcoming compensation changes for its 2020 pay plan in recognition of the “enormous challenges” advisors are facing during a time of extreme market volatility and a global pandemic. Some of the now-postponed changes could have required some advisors to generate more revenue to earn the same pay.”

April 1st is moments away and the reality that this health crisis is still growing, rather than slowing gives advisors case for concern when it comes to the reinstatement of the increased comp grid levels. The rumblings have picked up speed over the weekend and there is some rumored evidence that they could be pushed back even further.

Two sources that we spoke with at the firm believe that the comp grid changes could ultimately be annexed into 2021. The challenges that advisors are facing now and probably throughout the foreseeable future almost demand it. One of the sources put it this way:

“The announcement is a no-brainer, but firm brass need to get further ahead of this if they don’t want departures to accelerate. That is a real possibility. Any and all pressure points are heightened right now and cooler heads need to prevail up in the ivory tower. No matter what the new comp grid changes were meant to produce – zero chance that those metrics are going to be made. Should be an easy and well received decision to push all of it to 2021.”

That makes all the sense in the world. But global investment banks aren’t always as smart as they think they are. And a little reminder when it comes to departures and Morgan Stanley’s current operating process on legally attacking those that leave with court ordered TRO’s – anyone checked on whether or not courts are currently open for business at the moment? Nope. Act accordingly.

OUTAGE: Morgan Stanley Outages Firm Wide For Wealth Management; App And Website Down For Clients As Well

Morgan Stanley is currently experiencing an outage across their wealth management trading operations internally; as well as the client facing website and app. In the midst of historic market volaitility, a pandemic, and a fear index that has reached historic levels – Morgan Stanley clients are in the dark.

As it stands right now, the operations team is furiously working to fix whatever has the current system down and clients are being called to avoid any sort of panic. As of yet the markets have yet to react to this development, but if it stretches out any further, there could be ripples that make their way into the broader markets.

Morgan Stanley is considered the largest wealth management operation in the Unites States given their total financial advisor headcount. Beyond that they compete directly with the likes of Goldman Sachs, Barclays, J. P. Morgan and others for institutional deal flow, and other ‘high-minded’ finance work product. This kind of outage will bring up serious questions from potential ‘clients of scale’ on the institutional side of things as well.

As of this moment, the outage still remains…developing.

In a note sent to advisors, Morgan Stanley acknowledged the outage and attempted some level of guidance: “[O]rder entry and order status continues to experience issues and may be unavailable,” the company ,essaged to wealth management “field and operations” employees near 1PM. A second message said, advisors were told that “multiple applications are experiencing latency or may be unstable. Technology is aware and investigating.”

As of 2:50PM the systems remain down. Developing.