SOURCE: Merrill Lynch Coronavirus Memo In San Francisco; Firm Circulates Email Shortly After Confirmed Wells Fargo Case In Financial District

Merrill Lynch management was alarmed when they were alerted of a confirmed coronavirus case in their building at 555 California Street in San Francisco late yesterday. So concerned that management affected a late evening conference call and decided on a communication plan to seek to calm essential staff and advisors at the location several floors underneath Wells Fargo.

As advisors and staff made there way to their offices this morning they were met with an email communication describing the situation. Specifically working through ‘work from home’ policies, CDC recommended precautions, and a link to a CDC statement giving the building an ‘all clear’.

For some that was enough to ease their concerns, but for others, they don’t believe they can be too careful. A source we spoke to at the firm that described the memo was one that is taking extra precautions and working from home until the threat of the virus has passed in earnest.

Here is what he had to say about the last 48 hours:

“This whole thing is scary from a bunch of different angles. Beyond the obvious health risks, and the reality that most of us in this profession are at an advanced age and at greater risk for serious complications, you have the markets at full tilt to the downside, and nobody is sure what ‘peak coronavirus’ is actually going to be. Having a confirmed case in this building – no thanks, I’m staying home. Wells Fargo could’ve done a better job of alerting the entire building from a public safety standpoint. Pretty shitty of them. Caution should rule the day.”

Merrill moved quickly, though we’ve been tipped off that both Morgan Stanley and Goldman Sachs offices in the same location are preparing memos as well. As soon as we either here about or are sent a copy of them we will get them to you as quick as possible. Developing.

BREAKING: Confirmed Wells Fargo Advisors Coronavirus Case In San Francisco Financial District Branch

The coronavirus has found its way to the world of wealth management. In a tip that we just received, an internal memo was shared via email at Wells Fargo in San Francisco confirming an advisor diagnosed with COVID-19 on the 23rd floor of 555 California Street, San Francisco CA.

Our source had this to say, “I saw the memo and the case is definitely confirmed. The individual that has been diagnosed was first suspected to have the virus during the middle of last week. The confirmation of that diagnosis was made late yesterday, and Wells Fargo sent out a memo via email alerting all employees at 555 branch. Shit is serious.”

We have tracked down the name of the advisor that has been diagnosed, but for obvious medical privacy reasons we can’t release it. Point being, we’ve double and triple confirmed the diagnosis, location, and other important details of this story.

As expected all employees of the Wells Fargo 555 California Street branch have been given the option to work from home – and decisions are still being made regarding potential quarantine measures.

Wells Fargo isn’t the only high profile financial firm at 555 California Street: Goldman Sachs, Morgan Stanley, and Merrill Lynch all have wealth management branches and staff in the same building.

Expect those firms to circulate memos and adjust policy based on this confirmed case. Developing…

Wells Fargo Claimants Balk At Paltry Settlement: “This is a bullshit deal…”

Wells Fargo came to an agreement with a group of advisors that left the firm and demanded to be compensated for the deferred compensation that they were denied by the firm. And, in legal terms, they won via settlement – to the tune of $79M spread across a host of advisors involved in the lawsuit.

We spoke with several advisors initially involved in the lawsuit as well as others involved in litigation that mirrors ‘deferred comp’ actions. Most of the folks that we spoke to considered the Wells Fargo settlement to be a bad deal for the advisors and a good deal for the lawyers involved. Those lawyers, mind you, are set to get 33% of the total dollar amount (a cool $26M).

Here are a few quotes from advisors involved in the litigation, some who have opted out, and others who are considering the same action:

“This is a bullshit deal, period. It is pennies on the dollar compared to what we are really owed in legit deferred comp claims. Faced with the spectre of .15 to .20 cents on the dollar. I haven’t opted out yet, but I’m close to doing so. I took it this far, my thought it, why not take it significiantly further.”

An advisor who has decided to opt out of the deal had this to say, per media reports:

“It is an issue of legal fairness and the opportunity in California to get legal justice as opposed to a weak and ‘good for the lawyers’ settlement. Opting out is the right move and should produce an outcome significantly better than this one. Wells Fargo chose this deal because its the easy way out and is a paltry percentage of what was actually owed. I’m not willing to give in that easily.”

Another advisor was quick and to the point, “It is simple to me, fuck em. Just fuck em. Both the lawyers and Wells that conspired to get this kind of a deal done. I’m not about to take the money. I’m happy to roll the dice.”

Labor laws in California and North Dakota focusing on non-competitive business practices would entitle advisors in those states to recover 99% of the deferred compensation that Wells withheld. Clearly this reality makes sense for the advisors in those states to opt-out of the deal and take their action further.

We do expect more ‘defectors’ from the settlement and we expect them to become more vocal – not to mention courts continue to rule in favor of the individual versus big banks. The hangover from the financial crisis still looms large in many courtrooms. One way or another, time will tell.

Morgan Stanley Reacts To Coronavirus: “…moving half of trading floor to Westchester office on Monday”

Morgan Stanley advisors and traders in NYC are about to get the news that changes are coming to the trading floor and offices based on the Coronavirus outbreak.

In an internal communication that was forwarded to BrokerChalk traders and advisors are set to be shipped out of Morgan Stanley’s flagship offices and trading floor in NYC and shuttled to Westchester on Monday. Advisors will also be asked to consider a ‘work from home’ policy.

As COVID-19 begins to ripple through Wall Street in earnest (not just in asset prices and market swings) many expect several gathering places, such as trading floors, to become nearly vacant. Just yesterday Sequoia, one of the worlds largest venture capital firms, put out a memo calling the Coronavirus the ‘Black Swan of 2020’.

Adjusting staff geographically is a reasonable reaction to the virus and Morgan Stanley is set to take action.

A small portion of the Sequoia memo said this, “It will take considerable time — perhaps several quarters — before we can be confident that the virus has been contained. It will take even longer for the global economy to recover its footing. Some of you may experience softening demand; some of you may face supply challenges. While The Fed and other central banks can cut interest rates, monetary policy may prove a blunt tool in alleviating the economic ramifications of a global health crisis.”

Expect more disruptions and expect more announcements across Wall Street.

Merrill Lynch’s Love Affair With Young, Private Bankers Continues Unabated

Merrill Lynch has clearly pivoted from even giving reasonable lip service to recruiting tenured advisors at rival firms like Morgan Stanley and UBS and recent hires have made that clear. The force withing the ‘thundering herd’ that continues to turn Merrill into a psuedo bank brokerage has decided that private bankers are the preferred flavor of the month, and the younger the better.

This clear change of direction has led many to believe that the firm will eventually move to a wholly different compensation structure that eschews traditional ‘grid’ comp in favor of salary/bonus. I doubt that the firm makes it to that sort of structure anytime soon. In fact, it would be an epic surprise if they ever get to that type of seismic change in the next decade. They simply have too much to lose given the tenuous state of elder statesmen at the firm and the speed at which they could leave. But…

Should Merrill Lynch make good on a particular rumor of late, and exit the broker protocol we could be looking at a real sea change at the bank/firm.

Speaking to a number of recruiters who have made a ton of money from Merrill Lynch over the years they confirmed the interest in young, private bankers and the firms interest in paying them discounted, back end heavy deals. The thinking is that the deals aren’t a killer on quarterly balance sheets and the private bankers themselves aren’t jaded and cranky because of changes that have occurred at Merrill. If anything the newly hired private bankers are ecstatic about the grid comp model and other benefits available to them versus indentured servitude at JP Morgan or Goldman Sachs.

One recruiter had this to say, “Any private banker with reasonable assets and under the age of 40 is almost the perfect recruit right now at Merrill. Sure, they will talk to big teams at direct competitors, but they get giddy about private bankers at JPM and GS. And you’ll continue to see movement into Merrill from that section of the market.”

Expect to see younger and larger teams migrate to Merrill over the next 60 days. In fact, we know of several GS teams that are in deep conversations with Merrill right now. So keep your head on a swivel.

NO MORE FAVORS: Big, Tenured Advisor Benefits Evaporate, Often Targeted By Compliance And Management

Over the past few years the stories of Barron’s Top 100 advisors being fired has grown in a way that begs all manner of questions. Questions every bigger producer should be asking themselves and taking serious steps to protect their book, their career, and their reputation.

Late last year another ‘advisor of scale’, Craig Findley, was fired from UBS. As the details have leaked out he wasn’t fired for industry red lines such as unauthorized trading or fraud, but rather ‘outside activities, personal matters, and expense reporting’. Potential offenses which have largely been favorably interpreted on behalf of big producing advisors like Mr. Findley.

(**The rub on Findlay, per media reports, played out this way: “UBS explicitly said that the termination was not related to sales or client-related issues. But the U-5 language—including the use of “outside activities” rather than the more common termination cause of unauthorized “outside business activities”—suggests personnel and expense issues, said people familiar with compliance and legal notices who declined to be identified because they were not familiar with Findley’s case.”)

There is a narrative amongst the broker masses that believes that larger advisors increasingly have a target on their back. Wirehouses are particularly of interest as more big name advisors have been fired from those firms and made for splashy headlines. One wonders if that narrative has any merit to it, or is it simply an ‘us against the man’ mentality finding a cause to rally around?

Whether that narrative is real or perceived it still leaves us with a problem to solve. With sometimes billions in assets under management and multiple millions in annual revenue, advisors are brands that need to be protected.

Every manner of precautions need to be considered. Some suggestions that should be seriously considered are as such: personal legal counsel (the firms lawyers are NOT your lawyers or your friend), a compliance focused, salaried employee on your team, quarterly reviews of firm policy, annual off-site team meetings focused solely on client communications and how they match with firm policy, copious note taking, and any other measure that stays two steps ahead of your firms compliance and legal departments.

If you think one of those suggestions go too far…you are already at risk. This goes beyond personal integrity. You are protecting an asset that you’ve built over decades and may want to pass on as a legacy to your children. Should you be so careless as to leave it in the hands of an annual firm audit and firm paid compliance personnel? No, no you shouldn’t.

The reality today in wealth management is this, find a way to keep yourself uncomfortable and retain as much control of your business as you can. Be personally vigilant – it may save your career.

Rockefeller Rush! Firm Expects To Add Large Wirehouse Teams In Texas And NYC In Short Order

Rockefeller has quickly become a preferred destination for wirehouse teams seeking comfort in both name and location when it comes to servicing clients and hitting the recruiting bid. Whether it is NYC, LA, and even Florida – Rockefeller and its President and CEO, Greg Fleming, are resonating in the deep end of the wealth management pool. Having already added better than $4 billion in client assets in 2020, we spoke to sources at Rockefeller that claim the firm is about to significantly add to that number.

Speaking on condition of anonymity, our sources told us that Texas has been a geographic ‘press point’ for the firm; specifically, Houston and Dallas. Here is what one of our internal sources had to say:

“We do expect strong movement to our brand in Texas in the second quarter and beyond. We already have had success there, but our pipeline tells us that we could double assets, headcount, and annualized revenue in money center cities (Houston, Dallas) there. We’ve focused resources there and the dividends are about to come in.”

When asked other geographic locations that could see significant upside in Q2 the narrative was similar, albeit located elsewhere on the map:

“We expect the momentum to continue in NYC and on the west coast in LA as well. The narrative here in the city (New York City) is simple and clearly the brand resonates with native New Yorker’s and east coast advisors. But we want to make sure that a like-minded message goes both deep and wide across the US. We like our pipeline in LA and San Francisco currently and expect to put wins on the board in each location as 2020 moves forward.”

Speaking to a recruiter who is heavily involved with the Rockefeller brand he mentioned something unique about announcements on the way, “…the name is really, really hot…and you wouldn’t think so, but the current market sell-off and increased volatility is only going to serve to speed up recruitment’s rather than slow them down. Rockefeller is uniquely poised to benefit from that potentially short-term dynamic given the comfort with which advisors find with their culture and platform. And, yeah, I can confirm the pending movement in Texas – expect it to make headlines and to really build momentum for the rest of 2020 in that region for them.”

A case could be made that Rockefeller is making a long-term play to become a wirehouse. Is it so ridiculous to believe that twenty years from now a name like Rockefeller could be mentioned right alongside Morgan Stanley? Nope. Smart move Mr. Fleming, smart move indeed.

Stifel Abroad: Ron Kruszewski Touts Strength Of Wealth Management Revenue Growth, Expects 2020 To Be No Different

Stifel CEO, Ron Kruszewski, is a traveling man. Finding himself in Israel talking about partnerships in ‘early funding’ startups he commented on the strength of Stifel’s wealth management brand and the role it will play in the firms growth in 2020.

Per media reports of Mr. Kruszewski’s time in Israel:

”Stifel Financial expects wealth management to drive growth in 2020 following a record year for the division, says Chief Executive Officer Ronald Kruszewski.”

“Roughly half of the firm’s revenue growth is likely to come from wealth management this year, according to Kruszewski. Stifel, which manages about $350 billion of client assets, plans to bring in more customers by offering direct investments in private companies for the first time, he said.”

Stifel has been recruiting in such a way that revenue and profits inside the wealth management division have exploded. Coupling that success with an active and successful acquisition strategy (re: Barclays wealth) has mushroomed assets under management and the fees that follow.

The Stifel story remains a case study in aggressive leadership and smart acquisitions. One could say that in the past decade every single acquisition made by Stifel has worked to near perfection.

Barclays US wealth management unit being at the forefront of that reality. When that deal was first announced in late 2015 many industry experts were skeptical that Stifel could hang on to the elite advisors they had acquired. Four and a half years hence, mission accomplished.


Comply Or Die: Morgan Stanley Advisors Continue To Struggle With 2020 Comp Grid Changes

For the first time in 3 years Morgan Stanley has chosen to increase grid levels and add new metrics forcing advisors to do more business to make the same amount of money. In other words, codifying the very antithesis of dealing in the clients best interests.

Morgan Stanley, of course, would argue that these changes don’t put them and their advisors at odds with clients, but at minimum, it is a passive policy that incentivizes advisors to put their financial interests a few basis points before their clients. It is hard to argue otherwise.
“The brokerage giant has modified the “grid” that determines how much advisors retain of the fees and commissions their customers pay, raising production-range thresholds about 10% to qualify for their current payouts, according to people familiar with the 2020 plan.”

“For example, the lower mid-range of brokers who now keep 41% of customer revenue for producing $485,000 to $600,000 annually will have to generate $535,000 to $660,000 in the new plan. Those who now keep 49.5% when they hit the $1.8 million-to-$2.4-million range will have to generate at least $2.0 million, waiting until they reach $2.65 million to hit the next level up. The change, which takes effect in April, will affect about one-third of the wirehouse’s advisors, according to the sources.”

“The change is the first that Morgan Stanley has made to brokers’ core payout formula in three years. Other so-called wirehouses have similarly refrained from changing the grid for at least that long, fearful of antagonizing their sales forces at a time when brokers have had to accommodate to new growth, compliance and practice management changes.”

So Morgan Stanley is deciding to lead the industry in angering its advisor force. Kudos. And we’ve yet to mention that they also led their peers in exiting the broker protocol and suing advisors who take their personal brand and clients elsewhere.

Stop us if you think Morgan Stanley is a fantastic place to work. Seems the ‘house’ is more like a jail cell over at MS.

UBS Flagship Team Set To Exit; Powerhouse Team Will Be An Eye Opener For Firm Brass

UBS is bracing for significant advisor losses throughout 2020. At least they better be. The aggressive comp grid changes provided the perfect cover for advisors and teams on the edge when considering a move to a new firm, to hit the bid.

**The $14M dollar team that we were given the tip on late Friday is one of the teams that we were alluding to in this article. And there are more to come.**

The first fruits of UBS’ mistakes is about to start hitting the tape.

In a discussion with a highly regarded recruiter, that is plugged in across the industry, the expectations for a coming wave of UBS departures is significant. So much so that one of the flagship teams in the country’s center is ‘dotting i’s and crossing t’s’ on their transition.

“This isn’t a surprise, as UBS was already vulnerable before the flood gates finally opened. It is nearly impossible to quantify the the scale of the company grid miss-step and how quickly the fallout has developed.”

”Expect three different teams to be in the news in short order, one of them will be an eye opener on the East Coast. And you aren’t going to have to wait very long for it to hit the tape. Not going to give it completely away, but it’s a big one.”

As the conversation continued and went off background more details were shared. Again, this one will be a big loss for UBS and a huge win for the firm that will be welcoming them.

Brace yourselves folks, it’s about to get litty litty on the recruiting trail.