Broker Takedowns: Federal and State Agencies Are Looking For The Next Tom Buck and Ami Forte

The Tom Buck saga has been an epic meltdown worth paying attention to for a little more than three years. Eventually culminating in a 40-month federal prison sentence for the once revered and Barron’s Top 100 ‘certified’ financial advisor.

A short little recap. Tom was the biggest Merrill Lynch retail advisor in Indiana for more than a decade. Merrill compliance completed an audit and something didn’t smell quite right. Tom was let go. But that wasn’t the end of the story.

Federal prosecutors in Indianapolis took a liking to the details of the case and pursued what they saw as fraud amongst other criminal activities such as not telling clients about alternative fee structures available to them. Federal prosecutors brought charges and indicted Tom.

Tom settled, monetarily, with financial regulatory agencies to the tune of better than $5MM bucks.

He decided to plead guilty to a few of the charges brought against him. And after several delays (and proof of certain facts that clients weren’t monetarily harmed in any way and actually made money under his commission based tutelage) He was sentenced to 40 months in federal prison.


Now, word on the street is that federal prosecutors in several surrounding states (Illinois, Michigan, Ohio, Missouri) are looking to make the same kind of splash by pursuing so-called ‘bad actors’ within the broker ranks.

Federal prosecutors offices are aware of the press this case garnered and the ease at which it was executed. And they likely believe there are many other advisors out there with a similar profile.

Again, chilling.

While you may not want to admit it to anyone out loud, or even at the next branch office party or wholesaler golf junket – Tom Buck is a troubling tale for brokers who came up doing things a certain, and legal, way. Used to be, if an advisor of scale cut a corner or two he’d get a slap on the hand, maybe a note in his file, and be told to clean things up. All while keeping the entire process in house. But now?

If this story didn’t scare you and reset your idea or ‘risk management’ as an advisor we suggest you reconsider. Please take note and beware – times have remarkably changed. It is time to gird your loins.

Merrill Lynch Bumps Retirement Bonuses; Feels Like A Backdoor ‘Asset Retention’ Plan To Some

Merrill Lynch just rolled out a new ‘comp plan’ for retiring advisors who want to be compensated for handing their books off to younger advisors. The changes to the plan will take a bit to kick in, but seem to offer meaningful bonus boosts across the board. So much so that some are seeing this new plan as a pseudo ‘low-key’ extra round of retention bonuses.
Per reports:
“Merrill sweetened the program and made other tweaks—including guaranteeing the starting payout as a floor for age-eligible brokers in top-recognition clubs and those with at least 20 years’ experience, even if production revenue from their transitioned clients falls—to compete with improvements UBS and Morgan Stanley made in their programs in 2017 and 2018, respectively, according to a senior executive and some advisors who said they had lobbied for revisions.”

“Merrill executives told brokers that the new program is the only one in the industry with a fixed payout guarantee. (It had phased out the guarantee last August.)”

“The changes will not be effective until November 2021, which the executive said gives advisors contemplating retirement time to discuss their plans with teammates, clients and their families. The program is open to brokers who have at least five years of experience at Merrill and are at least 55, provided that the two numbers add up to 65. (A 55-year-old with ten years at the firm makes the cut, but a 54-year-old with 11 years does not.)”

Interesting move by Merrill here. Defining the opportunity to stay at the company, with a string of bonuses attached, as larger and larger teams continue to flee the firm. And you can bet that their bean counters crunched the numbers on the size of teams with elder statesmen attached to them and the response they could reasonably expect from them.

As a ‘low key’ retention package for certain types of advisors we’d guess that this could/should work. As per usual, time will tell.

“I did not leave Merrill Lynch, I left Bank of America…”

The march away from Bank of America Merrill Lynch continues unabated. Large teams seem to be the greater portion of transitions walking away from what used to be the ‘thundering herd’ on Wall Street and across the United States. An interesting quote surfaced from late in 2019 that seems to be ringing true already in 2020.

Per media reports:

“A mother-son advisor team at Merrill Lynch’s Buckhead office in Atlanta left before the Labor Day weekend to join RBC Wealth Management-U.S. Mary Elizabeth Dale, a 38-year industry veteran who had been with Merrill Lynch for more than a decade, made the move Thursday with her son Jacob, another advisor Chase Rosenberg and two associates.”

“She was a senior vice president at Merrill, according to her former website. They managed $453 million in client assets, according to an RBC spokeswoman. Their Merrill-to-RBC route in Atlanta traces the same path made by the $210-million-asset team of Christopher Sanders and Daniel Crews in June.”

“We were saddened by the changes that Bank of America has made to Merrill Lynch over the past decade,” said Dale, who began his brokerage career in 2010 at Merrill. “I did not leave Merrill Lynch; I left Bank of America.”

You could turn those words into a novel. Dozens and dozens of real world stories about advisors who were fiercely loyal to the Merrill Lynch brand, but were pushed away like a jilted spouse who simply couldn’t take it anymore. Seriously, that is exactly what that quote sounds like. A spouse forced to leave his partner, all the while mourning the loss of the time and connection with their kids. Sad.

Meanwhile, another $450M in client assets walk out the door and Merrill continues to be the biggest recruiting loser on the street this year. Better than $20B has walked out the door in 2019, better than 50% more than Morgan Stanley and Well Fargo. That directly speaks to the cultural breakdown at the firm.

And we expect the exodus to continue.

“I will say this, fuck those guys, we are going the distance…”

As the saying goes, ‘hell hath no fury like a woman scorned’. Today it sounds like the same can be said for an advisor scorned. Often times, when an advisor finally gets to a point where he/she is ready to depart their current firm, they’ve built up enough animosity that they can’t leave fast enough, and maybe, loudly enough.

That absolutely remains the case with several pockets of advisors that were fucked over by Credit Suisse in late 2015 and are still fighting legal battles for remuneration that they fiercely believe they are owed.

Here are a few comments from a group that is still engaged in litigation with Credit Suisse:

“They are fighting us in Chicago tooth & nail. I believe that their attorneys are paid by the word.”

”It’s a financial war of attrition. I’m out of pocket $200,000 in legal fees so far. Fuck them! Going to go the distance here.“

Emotions run high when advisors, who dedicate their lives, often times, to one or two firms, and then get bent over and told to spell R-U-N. Read that again.

Credit Suisse has been hot garbage for nearly a decade and yet continue to fight advisors for every penny in a geography and division where they no longer do business. So, yeah, fuck em’!

LEGAL LOSSES: UBS Advisors That Migrated From Credit Suisse Are Easily Winning Deferred Comp Arbitration Awards

When Credit Suisse shuttered it’s US wealth management operations in 2015 they effectively forced hundreds of into ‘termination’ status. Attempting to paper over that truth with an agreement with Wells Fargo and a ‘promise to recruit’ architecture, Credit Suisse thought it had legally avoided massive amount owed in deferred compensation. Oops.

In arbitration hearings across the country Credit Suisse has been losing, and losing badly in deferred comp cases. There doesn’t seem to be any slowing of that momentum; in fact, the losing streak could be set to accelerate.


Per media reports of the latest Credit Suisse beating:

”In the Feb. 14 award, a three-person Financial Industry Regulatory Authority Inc. arbitration panel found Credit Suisse liable for a breach of contract involving Jonathan J. Galli, Paul T. Connolly, Alexander V. Martinelli and Christopher L. Herlihy.”

“The arbitrators awarded each of them compensatory damages, costs and attorneys’ fees. They also awarded Mr. Herlihy interest on his damages. The total award was $2,096,609. The arbitrators denied Credit Suisse’s counterclaim.”

Compensatory damages, costs and attorney’s fees. Ouch. Just another precedent setting layer for the next round of Credit Suisse and UBS arbitration hearing.

Of interest, noted Wall Street and securities law attorney, Brian Neville, said this on LinkedIn when the award was announced:

“Another win for Lax & Neville for former Credit Suisse employees. This is he fifth win with no losses and the seven win total against Credit Suisse.”

Why Credit Suisse doesn’t attempt to settle these claims en masse we can’t understand – but mounting and consistent losses are a terrible look. Seems that the old Animal House line is prescient for CS at the moment, “the beatings will continue until morale improves.”

Legal Documents Reveal; Credit Suisse Is The Stupidest Bank In The World

You really can’t make this kind of stuff up and actually get away with it. Adding enormous insult to injury, the latest document dump connected to ongoing litigation between jilted former advisors of Credit Suisse’s now defunct (purchased via Wells Fargo) US wealth management operations – makes it clear that Credit Suisse brass are some of the keenest idiots the industry has ever seen. Full stop.

Catalogued in the documents are double-minded emails and conversations about the sale of the division, while also stating that they still wanted to remain ‘in the business’ in some way. What? Take a quick look at a few pieces of commentary from the CEO, Tidjane Thiam, during the rush to sell the division:

We never agreed never to come back to wealth management,” Chief Executive Officer Tidjane Thiam, still in his first months on the job, wrote to a top executive on the morning of the pullout announcement.”

Uh, okay? Lol.

And how about this one:

“In a message on the morning the Wells Fargo deal was announced, Thiam told Robert Shafir, who was the Americas CEO of Credit Suisse, that he wouldn’t agree to give up serving ultra-high-net-worth clients in the U.S. and would continue offering lending and other products to them. “We do not intend to return to wealth management per se,” he wrote, according to the court documents. “We could agree to be silent on that point.”

Soooo… on the morning of selling their North American wealth management operations the CEO is sending emails about finding ways to somehow stay ‘a little bit pregnant’, but remain silent on that point – BUT IS ANNOUNCING A SALE TO WELLS FARGO!

Seriously – what a clown show. This lends incredible credence to the wealth management meme that real pros in the space manage assets, and those that don’t just manage. In other words, the well educated idiots migrate to the top. And in the case of Credit Suisse and its epic fall from a nice perch among elite investment banks a decade ago, truer words can’t be spoken.

It certainly shouldn’t be wondered why Credit Suisse keeps getting hammered in arbitration connected to deferred comp owed to former advisors when the US WMA portion of the firm shuttered in 2015. The document dump that shows gross incompetence across the C-Suite is striking. A fire sale to an organization that had its own serious problems that had yet to be revealed – that struggled mightily to hang on to the human assets it had purchased.

Part of the well known transition for the Credit Suisse shutdown was the way that UBS benefited. Take a quick look at an email between a well known NYC manager and his colleagues regarding the feeding frenzy that was the Credit Suisse sale:

“In an email titled “Credit Suisse Deal,” a UBS managing director, John Decker, wrote that Credit Suisse advisers were joking that “UBS stands for ‘Ultimate Beneficiary of our stupidity’ (Meaning Credit Suisse’s Stupidity) — (They are starting to grieve),” according to a copy of the message submitted in New York state court. Decker didn’t respond to a request for comment.”

Well said John Decker, well said – stupidity.

First Republic Lands $10M Goldman Sachs Team In NYC; Continues ‘Large Acquisition’ Strategy

First Republic is flying high at the moment. Really, really high. After landing a massive team in Washington from Wells Fargo, they’ve done the same in NYC, poaching from none other than Goldman Sachs.

We are still gathering information from different sources today, but we know (from First Republic sources) that Brian Zakrocki and his team moved from Goldman Sachs to First Republic on Friday and brought better than $10M in annual revenue with them.

As we search for the correct assets under management number, we’ve heard both $2B and $3B floated in our direction. We suspect the true number lies somewhere in the middle.

Mr. Zakrocki has spent nearly his entire career at Goldman Sachs after a short stint at Arthur Anderson. 17 years at Goldman Sachs in a Senior Private Wealth Advisor role means Mr. Zakrocki has been working with UHNW clients in the NYC area, and doing so ‘at scale’.

Some questions worth asking and following up on: does the GS team come with non-compete or non-solicit contractual language? Or even a potential garden leave? Again, details that will come out over the following weeks.

Still, First Republic is making serious moves on both coasts this President’s Day weekend. And did we mention the size of First Republic deals these days? Ummm, yeah: 500%. You do the math for Mr. Zakrocki and his closest Goldman Sachs friends.

UBS Source: “There could be a CEO change coming at US WMA…”

There is all manner of information swirling around the water cooler at UBS these days. Not that the phenomenon is new, rather it’s become much more pronounced after the firm launched a new comp grid that put the screws to advisors nether regions. The pain in the stomach that lingers has advisors talking and listening to what sounds like changes that are coming.

One UBS source reached out to us today and was short and sweet:

“There could be a CEO change coming up.”

That interesting quip was followed up by another source that had a little more to say:

”Yeah – that rumor is out there right now. The comp grid thing was an internal nightmare. And between you and I, Jason Chandler did what he could to pull it back and make it less painful. Read between the lines there as to a change at the top of wealth management here in the US.”

Another element that will be of interest for UBS at the moment – you can expect some departures this weekend. A few ‘of scale’.

The upshot here is that there is significant unrest amongst advisors at the firm, a year after leading the wires (on a percentage basis) in losing advisors.

Do advisors really care who the CEO of wealth management americas is? No they don’t. But they do care about their comp grid and who they perceive is fucking with it.

Top 40 Under 40 Fail; Advisor With Ridiculous Return On Assets Makes Industry List

We are having a hard time figuring this one out. Every year On Wall Street puts together several ‘Top 40 Under 40’ lists and they are widely lauded across the industry.

Both the publication and the inhabitants of the lists are celebrated, as they should be. But this year, one particular member – and his assets to revenue ratio – stuck out in a way that didn’t hit right.

Eric Englund, a 36 year old advisor from RBC in San Francisco, CA comes in on the list at number 14. Well done Eric.

But there is a problem. Eric claims assets of $155,000,000.00. Fair enough. But he then claims (and this is essentially the deciding factor when it comes to being included on the Top 40 Under 40 list) annual revenue of $3.9M. Whoa.

So doing a bit of math, which albeit is a bit difficult for this scribe – it seems that Mr. Englund’s return on assets rings in at better than 250 bps!! Come again??

Not only does this raise the proverbial red flag for being named to a list like this – and the applause that come with it. But generally speaking, and ROA of 250 bps on any book at any reasonable shop is going to draw the attention of compliance and management – or at least it should.

At best, a reasonable industry standard for return on assets managed is 100 bps; but for the best in the profession it is probably closer to 65-75 bps. NOT 250 bps!!!

Far be it from us to be the last and only word on how Mr. Englund conducts his business, what he charges, and the types of fees the products he offers incur. In today’s current regulatory environment there is no mandated cap on return on assets. But… yikes.

It may make some sense, if he hasn’t already been approached by management/compliance, to ease up on the ‘juice’. It isn’t a good look.

UBS Advisor: “They are dealing with a serious set of bad facts…”

A UBS advisor reached out to us to describe the ongoing legal battle with rival Credit Suisse with respect to deferred compensation claims. The legal tangling remains front and center for a large group of advisors that left the now defunct CS wealth management arm in the US, and they are intent on getting what they are owed.

You may remember that Wells Fargo just settled several cases connected to deferred compensation with departed advisors. That legal opinion is now on the record; but the group we spoke with believes Credit Suisse has nearly zero chance to get off so easily.

Here is what the UBS advisor we spoke to said:

“Wells has a tendency to settle matters. Credit Suisse looks at their legal department as a profit center. Opposing us on our arbitration is Epstein Becker and Green. They have a Ron Green at every single hearing with two other partners. He represented Bill O’Reilly on his last sexual-harassment lawsuit, and represented Mr. Dolan and Isaiah Thomas from the Knicks when they were sued by their highest ranking female African-American employee for sexual-harassment back in 2007 or 2008. He’s the lawyer you call when you have a bad fact pattern. Credit Suisse is paying a bloody fortune on lawyers rather than settling with us.” **the above is a bit disjointed because it is purposefully unedited.

Bad fact pattern. Credit Suisse will either pay now or pay later. That particular writing is in the wall. And these UBS advisors know it and are happy to play the game until the final bell. Meanwhile, Credit Suisse is paying exorbitant legal fees via a profit center that no longer exists.

No wonder some consider them the stupidest bank in the world.