Recent shockwaves through the banking sector have had many advisors and clients on edge for obvious reasons. For First Republic advisors, the $30 billion dollar injection of capital from peers such as JP Morgan, Citibank, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, etc, doesn’t seem to have comforted their clients who are moving assets out at record speed. It doesn’t help, the wolves of Wall Street are preying upon these clients who are also scaring them out.
Though a White Knight to save the private client franchise is highly likely. Veteran industry exec’s like former CEO of Cetera Financial Group stated, “First Republic wealth management is a great franchise, and there have been discussions about the bank being acquired by a larger institution. It would make sense on a lot of different levels for someone to take a look at them on the acquisition level.” In 2022, First Republic’s wealth management practice generated 15% of its total revenue, with $271.2 billion in total wealth management assets at the end of last year.
What’s to make of this? First off, we’ve seen this rodeo from Wall Street many times with boutique firms. Looking back historically, Hambrecht & Quist was acquired by JP Morgan, Alex Brown was acquired by Bankers Trust and then by Deutsche Bank, who was also then acquired by Raymond Jones, Barclays was acquired by Stifel Nicolas, Credit Suisse was acquired by Wells Fargo, and even big firms like Merrill Lynch was acquired by Bank of America.
Roger Gershman, a veteran consultant of The Gershman Group has good experience in these takeovers says, “ most acquisitions of these practices are not only protected with bigger platforms but are also protected with their front and back-end deals being honored with a kicker to include retention bonuses of upwards of 100% of trailing T-12 production.
First Republic advisors’ practices are safe with their highly profitable businesses. It is true that events like this makes one question but there’s been a long history of banks and brokerage houses consistently getting themselves in trouble which impacts the livelihood and sanity of advisors. Yes, it makes life more difficult and seemingly unsure. With acquisitions by larger firms comes more regulation, compliance, and operations playing more and more to the lowest common denominator advisor. Ultimately this can impact advisors’ businesses by way of pay cuts and cuts in support staff. Only time will tell the full impact on advisors as a potential acquisition occurs. Nonetheless, advisors’ businesses remain protected.
Gershman says, “advisor practices at First Republic are some of the most sophisticated and best in our industry and I’m sure there will be some defections since some of the big bank acquirers are just those firms advisors tried to stay away from.”
If any of this seems too much or unsettling for a First Republic advisor, then the option might be to not go from the frying pan into the fire at yet another over regulated, uncultured bank. Many advisors on the street just cannot trust the banks anymore to stay out of trouble and they care to go fully independent, controlling their own destiny, not someone else’s.
