Silicon Valley Bank Advisors Assess Their Options
With three banks collapsing in a short period of time, maybe Silicon Valley Bank (SVB) advisors can find comfort in numbers – they aren’t alone as the similarly aligned First Republic Bank had to be bailed out as well. Though a different bailout in structure from the Feds than with First Republic (from peer banks), the considerations advisors should be assessing are quite similar between the two. With SVB Private’s $17 billion in assets including those from the 2021 acquisition of Boston Private Holdings, it is to be determined the fate of the wealth management practice and who might acquire it.
What’s to make of this? First off, we’ve seen this pattern from Wall Street many times before with boutique firms. Taking a look back historically, Hambrecht & Quist was acquired by JP Morgan, Alex Brown was acquired by Bankers Trust, Deutsche Bank was acquired by Raymond Jones, Barclays was acquired by Stifel Financial Corporation, Credit Suisse was acquired by Wells Fargo, and Merrill Lynch was acquired by Bank of America. In the past, advisors were protected with front and back-end deals honored with a kicker to include retention bonuses at 100% of trailing T-12 production.
An investment banker who chose not to be named stated, “I don’t think the advisors at SVB are going to run for the gates. People have lined up since the collapse to buy them. But it’s unsure how this shakes out with financial advisors and the details of their contracts, like any noncompetes or time off for garden leave. I believe it will sell and probably quick.” According to the Form ADV for SVB Wealth, another name for SVB Private, SVB uses Fidelity Investments and Charles Schwab & Co. as custodians, meaning it would be easy for advisors using Fidelity and Schwab to hold onto client assets. The outcome for moving assets held at the bank is less clear.
SVB advisors are somewhat safe with their 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 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 as an acquisition looms.
We asked Roger Gershman who runs a consulting firm for advisors about what he thinks SVB advisors should be assessing, he stated, “SVB advisors serve a bespoke clientele that demands top-notch service, not question marks. If I were an advisor at SVB, I’d be thinking client first – what can best serve my clients after the collapse? With pay cuts, belt tightening on fancy events, and cuts to support staff, it is time to think about a firm that can serve the clientele as they are accustomed while also attending to compensation with hopefully not too much compliance and operations hawking.”
If any of this seems too much or unsettling for the SVB advisor, then the option to go fully independent, controlling one’s destiny, is always an option through a supporting platform.