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.

Stifel National Director Of Recruiting, John Pierce, Abruptly Dismissed From Firm; Questions Abound

Stifel has been a recruiting dynamo for the past three years. The culture, leadership, and comp offered at the ‘super regional’ has resonated with wirehouse advisors seeking friendly confines. Based on the annual NNA (net new assets) recorded by the firm the message has more than resonated.

Beyond executive leadership at the firm (CEO Ron Kruszewski and others) the key to the recruiting resurgence at the firm was John Pierce, now former National Director of Recruiting. He was tasked to build out the national branch manager led architecture that would allow Stifel to create the recruiting success it did.

And yet…

On Monday John Pierce was dismissed from the firm. We’ve yet to track down the specifics (calls to John Pierce went directly to voicemail) of why this has occurred. Stifel’s recruiting success, as we mentioned in a previous article (an article in which we did not speak to Mr. Pierce, rather we simply noted the obvious success by the numbers), seemed to be obvious. So why the abrupt dismissal?

That has yet to be established, but we expect to hear from industry insiders at some point as to what happened. As we searched for information we were able to establish that Mr. Pierce continues to reside in Philadelphia and recently purchased a home in Juno, Florida. That’s it.

A few other questions that remain after Mr. Pierce’s dismissal: Who replaces him at Stifel? Will Stifel’s recruiting momentum continue? Given it’s a long weekend this weekend, does this news disrupt the transfer of probable teams scheduled to move to Stifel?

These questions currently remain a mystery; in fact the whole episode is a mystery. Stay tuned for more details as we receive them.


GTFO With ‘Reverse Churning’; Edward Jones Lawsuit Remains An Industry Joke

A class-action lawsuit in California centered around the concept of ‘reverse churning’ continues. Focused on Edward Jones and their policy to shift away from a purely commission based fee structure (much like the rest of the wealth management universe), plaintiff lawyers have invented new ways to piss everybody off.

The case and the nature of the allegations connected with so-called reverse churning kicked enough dust that FINRA had even taken up the issue and began discussing it at industry events and internally.

**A quick word about reverse churning. The idea that the industry has touted fee-based accounts for a decade plus and now are potentially being raked over the coals for it is ridiculous. If you happen to be keeping score as it relates to regulators – commission based accounts are bad, and now fee based accounts are bad.

Still, one wonders who really benefits from this case being dismissed? Are brokers entitled to some sort of celebration based on relief from increased scrutiny around fee based accounts? Or is it wealth management executives that pushed advisors away from commission based practices that can claim victory? We aren’t so sure.

The upshot should be that advisors should be given the trust they are do to rightly manage client accounts and the costs associated with those accounts until they run afoul of the law. Bad actors will always exist whatever regulatory structures exist, and the law is nearly undefeated in catching them at it. Picking and choosing the ‘most right’ way for clients to pay for the advice, services and care that advisors give them should be up to clients.

This win for Edward Jones feels like a net-net public good for advisors at large. Let’s hope FINRA reads the verdict and opinion and acts in accordance with it.

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.

No Longer Protected; The Number Of Barron’s Advisors Fired In The Past Two Years Has Skyrocketed

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.

A few months ago another ‘advisor of scale’, Craig Findley, was fired from UBS. As the details 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 latest on Craig Findley via media reports: “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.

The Chilling Saga Of Tom Buck; An Ongoing Reminder To Legally ‘Gird Your Loins’

The Tom Buck saga has been an epic meltdown worth paying attention to for a little more than four 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.

BofA Continues To Punk Merrill Brand; Commercial ‘Fades To Black’ Famous Merrill Logo

Maybe this was the plan all along, when a shotgun wedding occurred in 2009. Bank of America was given control of Merrill Lynch and its 90 year history as the preeminent wealth management brand in the United States, and has systematically marginalized its advisors, brand, reputation, and overall standing within the industry.

The latest Bank of America commercial, dubbed “A Single Defining Moment”. The commercial mentions ‘Merrill’, not Merrill Lynch and at the end of the commercial the Merrill Lynch logo is wiped out in favor of Bank of America’s logo in less than a second. The entire spot is a testament as to how the bank views Merrill Lynch and its advisors – a division of the bank with the mandate to move as much product as possible.

It still is remarkable that the name has essentially been shortened to just ‘Merrill’ by the bank. No longer Merrill Lynch as its been known and revered for decades and decades. Just Merrill. Like the name of a legacy intern fresh out of a private university starting at a branch in Connecticut. Seriously.

The constant leak of advisors from Merrill that are of scale is the only story that matters. Irrespective of name changes and cultural appropriation – who leaves and the assets they take with them is what matters. And that continues unabated. No matter what additional headcount via bank branches or Merrill Edge add up to, the biggest advisors at Merrill continue to move to less constrictive pastures.

Still, the commercial is striking and revealing unto itself. Emblematic in many ways. The thundering herd is no longer what it used to be, no longer thundering, and no longer the largest herd on the street. Bank of America has hollowed it out, and not looking back.

That Didn’t Go So ‘Well’; Wells Fargo Loses 211 Net Brokers In Q4, Profit Plunges 63%

Looks like Wells Fargo could use a do over in their wealth management unit when it comes to the fourth quarter of 2019.

In fact, you can imagine that managers and executives in and around the wealth division couldn’t wait for the 2020 NYE ball to drop a couple weeks ago – cause 2019 was brutal.

Some numbers to digest:

  1. Wells Fargo lost a ‘net’ 211 advisors in the fourth quarter alone. That’s after pretty strong recruiting momentum in Q4. So the real number is probably closer to 300.
  2. In a raging bull market the wealth division’s profits took a beating – down 63% year over year.
  3. Expenses also soared, up 23% from the year ago period.
  4. Meanwhile, despite the three pain points above, this was Wells Fargo’s most successful recruiting year ever, based on head count and recruit metrics – average T12 and AUM.

The headlines will sting a little bit over the next week and may even slow some recruiting momentum that has been built at the firm. The pipeline at Wells Fargo, as we hear it from recruiters, is pretty robust. Offering the biggest deal on the street certainly is paying its dividends.

But the numbers above are a seriously deep hole to dig out of. 2020 needs to be a year of ‘quick wins’ on the recruiting trail, and headlines that don’t derail the fragile but recovering reputation of the firm.

A bottoming out of the internal metrics at Wells Fargo WMA should set everyone up for a rousing 2020 Q3 and Q4 though. Let’s see if they can properly take advantage of both deflated numbers and 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.