Tag Archive for: First Republic

First Republic Advisors in the Age of Increased Surveillance at JPMC – WADU

In recent times, advisors at various large firms have been grappling with a significant rise in surveillance and compliance measures. These measures encompass the monitoring of every action taken by advisors. While firms have always kept tabs on emails, phone communications, and office activities, the current level of surveillance represents a new frontier. This transition is particularly evident for First Republic advisors who find themselves at JPMorgan Chase & CO (JPMC), where they are experiencing a marked shift from a culture of freedom to one characterized by hawkish regulation and pervasive surveillance. For entrepreneurial-minded First Republic advisors, who joined a boutique firm for the autonomy it offered and the positive impact on their business and client experience, this sudden change can be jarring and worrisome.

In addition to monitoring employee’s personal cell phones – pictures, emails, calendars, and more most big firms are reportedly doing, it has come to light that JPMC employs an extensive surveillance program called “WADU” (Workforce Activity Data Utility). WADU utilizes advanced AI and machine learning to monitor nearly every aspect of an employee’s activities, both inside and outside the office. High-definition audio-visual security cameras are scattered throughout the premises and can collect data even when employees log into JPMC systems from home. This includes monitoring facial expressions, non-verbal cues, personal belongings visible in the background during remote logins, mouse clicks, typed words, phone calls, and more. All the collected data is instantly compiled into profiles accessible to management at any time, and alerts are triggered based on pre-programmed “concerns.” Zoom call durations, badge swipes, and movements within the office are also recorded. If JPMC discovers violations either on personal cell phones or through WADU, they’re fired. 

We sought the insights of Roger Gershman, who represents many First Republic advisors, to shed light on this matter. Gershman commented, “First Republic advisors are in for a significant culture shock as they transition from a boutique firm to a large bank. Adjusting from an entrepreneurial environment to a bureaucratic one won’t be easy. Moreover, the reports we’re hearing about the inner workings of JPMC’s surveillance system might prove uncomfortably invasive for free-spirited FRB advisors to endure.”

JPMC has also stated that employees that are director level and above must be in the office five days a week no matter if performance is demonstratively better from home. The in-office mandate poses a significant challenge for FRB advisors who were previously free to determine their most effective work methods and locations. The mood inside JPMC is dire. Employees express deep concerns, often using phrases like “Big Brother” and “1984” to describe the company. One employee remarked, “It has fostered paranoia, distrust, and, to be honest, a lack of respect. Many at JPMC feel like they’re just a number. Nothing more.” The situation has deteriorated to the point where employees have resorted to creative measures to outsmart the WADU system, such as taping over audio and video outlets and keeping their mouse in constant motion. It’s astonishing what lengths humans will go to in order to resist control.

For the free-spirited and entrepreneurial FRB advisor, this transition was not a choice but an enforced reality. Accepting a work environment that resembles a government institution rather than a business is deeply concerning. If these surveillance measures apply to advisors, one cannot help but wonder about the extent of client tracking. While we are accustomed to hearing about government surveillance, the creeping intrusion into our lives is now being witnessed in quasi-government firms like JPMC, which is the most regulated and closely intertwined with the government. The acquisition of JPMC has come with strings attached to the government, which has significantly altered the landscape. To say the least, this represents a far cry from the independence that advisors enjoyed at FRB. Consequently, many advisors are contemplating their options and exploring the possibility of joining a more boutique firm or pursuing full independence in their own RIA as a potential solution.

Advisors Are Abandoning Banks

Numerous times in the past, banks such as Credit Suisse, Barclay’s, Deutsche Bank, Bear Stearns, Lehman Brothers, and now First Republic, have gotten themselves in trouble leaving advisor’s practices in a vulnerable position.The case historically has been one of a symbiotic relationship between the investment and private banking divisions which benefitted private clients, advisors, and the bank itself.

Now with First Republic, the value proposition is a shadow of itself for clients and advisors. History repeats itself, banks and brokerage houses need advisors more than advisors need them. The mass of advisors at banks and brokerage firms dislike the idea of returning to another big bank or even boutique platform and are deciding to take matters into their own hands by creating their own RIA’s.

First Republic was one of the fastest growing and most successful stories on Wall Street with an incredible culture; it is a shame it has come to this. At First Republic, the relationship between private banking and advisors was mutually beneficial as the bank gained massive deposits, offered discounted lending solutions, and in turn advisor practices fed the bank, and the bank fed leads to advisors to make the entire proposition sticky and highly valuable. No longer.

For First Republic advisors, the proposition to return to a big wire house that they potentially left in recent years isn’t desirable – to UBS, Morgan Stanley, RBC, Wells Fargo, Rockefeller, and even the risks associated with a smaller firm. Roger Gershman, who advises advisors on moves (www.thegershmangroup.com) says, “the idea of moving to another bank is something advisors can hardly fathom, they are looking for something different.” These firms are still linked to practices that put advisors and clients at risk. If an advisor considering a move, do you want to put your business at potential risk again and are you ok with a client acting on news they hear about the firm which could cause a run or need to change again? There is a viable home run solution to this is starting an independent RIA.

The upside is that for the most part, advisor’s businesses are fairly immune to the ups and downs of banks. Banks and brokerage firms need advisors more than advisors need either of them, and the bank’s value proposition continues to erode causing advisors to flee. Custodians are a commodity whether or not it is Schwab, Fidelity, or Pershing and all the products and services, trading, and reporting are ubiquitous.

Gershman says, “there are three major 1099 large banking platforms where you can establish your own RIA – Raymond James, Ameriprise, and Wells Fargo Finet. The biggest and most dominant platform is Wells Fargo’s First Clearing custodian.” First Clearing services 50 broker dealers and hundreds of RIA’s, one of those being Wells Fargo who is hungry to help advisors establish their own independent practice, allowing them access to all platform benefits without reference to Wells Fargo the company.

Advisors, imagine that you could have all the benefits of being at a multinational big bank platform with full access to all the products and services without being an employee – instead as an independent contractor. Advisors own 100% equity of their business while accessing all the resources of bank platforms, technology, support, with net operating income averaging 70% 1099 income. Just the same as big banks, independent platforms pay a significant amount to transition. There is also significant private equity interest to sell any amount of your new RIA at LTCG.

Advisors have list access to a multinational wire house platform, investment banking and capital markets research, integrated private banking resources, custom credit, and family office and trust services. Advisors also have state of the art technology services that mirror being in house at a big firm: wealth management platform trading, client interface, advisor workstation, operations, legal and compliance, reporting technology, and financial planning software.

First Republic Advisors Leave Boutique for Big – Safety is Tantamount

First Republic advisors are seeking safety rather than an entrepreneurial platform given the firm’s fall from grace. To date, Morgan Stanley leads the big firm race for acquiring the top wealth management teams out of First Republic. CEO of Morgan Stanley, James Gorman, has proven to be a formidable acquirer of firms as he’s gobbled up E*Trade, Eaton Vance, and Solium Shareworks, might this continue to give Morgan Stanley an advantage in the race for teams? Time will tell, not to mention the offer packages.

There is no doubt that Morgan Stanley is a well-oiled machine that has stood above the riff raff, at least for now. Interestingly, the recent departure of one big team to Morgan Stanley comes on the heels of the team having left JP Morgan in the summer of 2020, now it will be right back to the big firm culture it had left, a reality many advisors and teams are facing. About $45Million in production has excited to Morgan;

*Vishal Bakshi NY Based had been managing $1.5 billion in assets and generating around $10 million in annual revenue. The three other members of his team, including David A. Greene, Cynthia Lichwick

Chirstopher W. Walters and Marc C. Koch who had been with First Republic in New York City for only four months. They had been managing $500 million in assets and generating around $4.8 million

*Natalie Schnuck joined Morgan Stanley after seven years at First Republic. She had been managing $324 million.

*Zipper-Duarte NY based team, led by Adam Zipper, Joseph Duarte, and Christopher Gates, the 13-person team produced $13 million in revenue with $1.8 billion in assets under management, and was the 36th best in New York for 2023, and 64th on Barron’s list for the top 100 private wealth management teams for 2022.

*Steven Levine took his 4-person team to Morgan Stanley in Miami, taking his $2.4 billion in client assets that generated $8 million in revenue. Levine is on Barron’s list of top 1200 financial advisors for 2023.

*Thomas Moore III, also New York based, the 53rd best in state for 2022 according to Forbes, took his $3.8 million in revenue to Morgan Stanley as well.

Wall Street firms, after having contributed to the $30 billion rescue plan for First Republic, are now direct beneficiaries of First Republic’s problems despite the bailout even if the hope isn’t to poach advisors and teams from the firm. The jockeying for first position for the most sought-after teams is on and hot, hot, hot it is!

Roger Gershman, an industry expert consultant has put together a Special First Republic Portal, says firms like Morgan Stanley seek assistance with from recruiters for FRB advisors, with settings meetings, documentation, deal packages and legal process.

Morgan Stanley has also gone on record saying that it is only fielding inbound inquiries from advisors and recruiters –surely the role of the recruiter in putting advisors at the top of the list is essential in this time of overwhelm and confusion.

First Republic Advisors Caught Flat Footed

On March 31, First Republic Bank announced that an acquisition is unlikely and that the firm will continue with restructuring and shoring up the bank. Most advisors are praying someone will come to the rescue, but few lifeboats seem to be on the horizon. Some question, even if there is a spin off or a White Knight, how they will grow a book in the future using First Republic’s tainted name?

Advisors banked their life career on First Republic, most believed it was their last move ever, and most are so very proud to be part of such a special, culturally rich firm. How can advisors even consider a move when many just went through the painful exercise to move their books escaping big firm culture and politics. Clients were sold the FRB platform, what happens to all the front-end payments, the backends, and the deferred comp for advisors? Will advisors and clients have to return to what the left with intention?

Wall Street simply doesn’t have the people power to handle this number of advisors considering moves, vetting, and eventually onboarding them. Over 300 First Republic advisors with businesses from $2 million to $75 million are getting destroyed by Wall Street with a flurry of texts and calls from managers, friends, and recruiters to consider jumping ship to the likes of Morgan Stanley, UBS, JP Morgan, the Royal Bank of Canada, Rockefeller Capital, and more. Normally the process of moving an advisor or team takes six months, not two weeks, and most certainly not with the volume of advisors and teams on the move. The energy is frantic, competitive, and utterly confusing.

Few teams are making a tactical or strategic plan. Mistakes are already being made on both sides. There already is a wide spread between what is offered one advisor versus another at the same firm, private documents are flying everywhere, advisors are fielding calls, taking meetings, and confidentiality is hardly being observed.

Roger Gershman, President of The Gershman Group, was himself was a $1B Top Advisor who has had experience when his firm was bought out and notes that “advisors need help, they are being barraged with phone calls and offers when they need to be focused on their business and taking clients through the downfall of the bank. We offer legal counsel, transition preparedness and documentation, and expertise into the best possible deals with the best cultural fit for an advisor or team’s business. With the spread on deals varying from advisor to advisor substantially up to 100 basis points or more, why would an advisor in these uncertain circumstances expect to take that much time to try and sort what the best deal is?” Consultants to advisors offer a confidential place to discuss options freely to determine the best fit in times of turbulence and rapid change.

First Republic Announces Spin Off

Anticipate this announcement imminently as our intelligence suggests.

As we’ve watched the banking industry stumble left and right, commentary and conjecture have run rampant. First Republic Bank, however, the darling success story of Wall Street, is the “at issue” everyone is trying to figure out regarding what’s next? A powerful rumor is that given Robert Thornton’s background as an investment banker (ex-Goldman Sachs), the notable and highly profitable wealth management division will be spun off into its own RIA, First Republic Advisors (FRA), with Pershing remaining the custodian of assets. What happens to the failed banking division is unclear and will be held away separately. Advisors get free of the failed banking division.

What does this mean for First Republic advisors? There are numerous positives. First, the culture of the First Republic advisor remains consistent for both the advisor and client without change. Clients will not have to move assets to a new platform and/or custodian. Clients are safe, and there is no affiliation with a bank that created choppy waters for advisors and clients in the first place. Assuming a massive investment by a either venture capital firm or a passive investment partner, First Republic would create a separate and distinct RIA, operations would be funded but also allows a private equity opportunity carry along/drag along rights for advisors with guaranteed front and back ends, potentially a cash offer, and a lucrative option in either an IPO or sale in future years. The potential negatives to this spinoff unit have much to do with who the venture capitalist is, how strong they are, and if an IPO or sale, at what price.

The seasoned consultant for top advisor teams nationally, Roger Gershman of The Gershman Group,  commented on options for First Republic advisors, “the fact is I am routing for First Republic Advisors to spinoff and be freed of the bank to keep consistency and culture intact as much as possible, that said, I counseling countless teams with a solid Plan B even given a favored Plan A.”

The other advice consultants like Gershman have is try and empower them to choose their own destiny since the storied firm they once knew and loved is very sadly not going to be the same. They chose First Republic for good reason as the best option for their clients, they honored their contract but, under terribly unforeseen circumstances, the bank could not honor theirs.

So, if and when there will be a new parent, advisors can now choose who that new parent will be to best serve the interests of their clients whether its First Republic 2.0 or New Co.  Competitively, FRB advisory teams are some of the most seasoned, high caliber advisors in the nation and Wall Street is salivating seeing economic packages of 400% guaranteed including front and back ends since acquiring firms know that 100% of the advisors’ business will follow.”

First Republic advisor, the choice is yours. Which destiny will you chose?

First Republic- Should Advisors Flee?

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.

First Republic’s $30B Rescue Fails to Soothe Investor Fear

Shares of First Republic have plummeted 81% this year.

First Republic Bank staved off a potential collapse after a group of bigger financial firms agreed to park a combined $30 billion in deposits with the lender. But the cash injection is only a short-term solution, and investors are unsatisfied.

The San Francisco-based company will still need to move quickly to find a way to remain independent, or strike a deal for a takeover. The deal with the 11 lenders including Bank of America Corp., JPMorgan Chase & Co. Citigroup Inc. and Wells Fargo & Co. includes deposits with an initial term of 120 days.

“The market may be interpreting that the $30 billion of new deposits that are going in may have staved off a depositor run, but it hasn’t added any new equity to the bank,” Arthur Wilmarth, professor emeritus at George Washington University’s law school, said in an interview. “The shareholders know that they are certainly at risk.”

First Republic shares closed down 33% to $23.03 after slumping as much as 35% in intraday trading Friday. They’ve plunged 81% this year.

Friday’s stock plunge underscores the tenuous situation for US policymakers. If the banks’ rescue ultimately succeeds in easing worries about the sector, Washington will have avoided fierce political blowback that certainly would have followed any government intervention. If it doesn’t calm broader concerns, officials face a series of tough choices on next steps.

Adding to the market’s worries is the fact that First Republic tapped a Federal Reserve liquidity line of as much as $109 billion in the days leading up to its rescue by the big banks, said Arnold Kakuda, a bank analyst at Bloomberg Intelligence. First Republic has been exploring strategic options, including a sale, Bloomberg News reported earlier this week.

“So maybe this $30 billion in deposits from big banks only buys time, but concerns remain,” Kakuda said.

A representative for the bank declined to comment.

Analysts have been forced to extrapolate from data First Republic provided to determine exactly how its financial position has changed in the past few days. One estimate from Jefferies Financial Group Inc. pegs potential deposit outflows at $89 billion. The bank said in a statement late Thursday that insured deposits “remained stable” between the close of business March 8 and March 15.

“Daily deposit outflows have slowed considerably,” First Republic said. According to a December filing, the bank had roughly $119 billion in uninsured deposits at the end of last year, a little more than 67% of its $176 billion in total deposits.

Meanwhile, analysts have been cutting their recommendations on the bank. Wedbush analyst David Chiaverini lowered First Republic to neutral, saying it’s difficult to “come up with a realistic scenario where there’s residual value for FRC common equity holders” in the event of a sale.

Morningstar Inc. strategist Eric Compton said while the $30 billion of deposits appear positive on the surface, it also confirms some of people’s worst fears about the financial health of the bank.

“Prior to this event, we did not know for sure if First Republic had indeed experienced a true run on the bank, or that perhaps the bank would be able to maintain its deposit base relatively intact,” Compton wrote Friday. “Disclosures made by First Republic regarding this latest liquidity injection remove all doubts that a significant runoff of deposits has occurred.”

Evercore Inc. analysts led by John Pancari said in a research note late Thursday that “the deposit infusion allows the bank to fight another day,” but that it’s “likely a temporary solution – particularly given the noted 120 day-window.”

First Republic is in discussions to raise money from banks or private equity firms by issuing new shares, the New York Times reported late Friday, citing three people with knowledge of the process. The terms are still under discussion, and a sale of the entire bank is also possible, the newspaper said. A First Republic spokesman declined to comment on the report.

First Republic specializes in private banking and has built up a wealth-management franchise with some $271 billion in assets. Those watching the company’s travails say that helps make it a potentially attractive takeover target.

“They never were a traditional bank,” said John Allison, the former head of BB&T Corp., a predecessor company to Truist Financial Corp. “They’re in a very good market, and they have a very good market share. They were after the high-income deposits. The negative to that is that they’re uninsured.”

Sources: Wealth Management

Merrill Can’t Stop the Bleeding – Another $3 Billion Gone in the First 3 Weeks of 2023

The deal with bloodletting is that it is supposed to cure a problem, is that what Andy Sieg thinks he’s doing? After massive AUM and revenue losses in 2022, Sieg is starting the year off with a bang with another $3 billion gone in just the first few weeks of 2023. I’m sure the podcast with Mindy helped.

The teams. David Mohamed and Justin Merola from Wellesley Hills, MA took their $8 million in revenue to First Republic Bank, perhaps the direct bank referrals are not only useful but lucrative. Alex Ladage, David Landon Smith, and Jorge Garcia in Austin, TX moved their $7.5 million in revenue and $900 million in AUM to Rockefeller Capital Management. Mark Karstaedt, Daniel Zomback, and Raymond Lin of New York, NY moved $2 million in revenue and $400 million in AUM to JP Morgan Advisors. Jeffrey Klinger and Bradley Quinn in San Francisco, CA moved $7 million in revenue and $1 billion in AUM to UBS. While two of these moves are still too big financial firms, what is clear is that the exodus at Merill just won’t stop – no matter where it is to.

Roger Gershman of the Gershman Group worked with Mr. Klinger at Credit Suisse, he stated “Jeff is a top-notch advisor, Merrill should be ashamed to put pressure on the best advisors to leave for other shops.  Best of luck to all the teams leaving Merrill.”

As we’ve covered extensively, advisors are leaving Merrill in droves for a number of reasons from grid and bonus cuts to creepy culture, to pushing products the bank wants sold, to playing to the lowest common denominator with firm established model portfolios. If advisors don’t fit the model, the firm wants them out and has made it downright impossible for many to continue their practice in the way they see fit. It will be interesting to watch the numbers to see just how much Merrill will lose in 2023. Any guesses?

The “Candid” Interview You Wish You Heard

A few days ago Mindy Diamond hosted a “candid” interview with Andy Sieg, The President of Bank of America Merrill Lynch. In that interview many were disappointed with the questions asked and more importantly the answers. In this episode we answer without bias – understanding what the firm is actually going through as we speak with many advisors, managers and those close to the situation.

Roger Gershman is the CEO of The Gershman Group and has a wealth of experience in financial advising and asset management. Roger brings a unique advantage to the world of financial services recruiting. Having spent twenty-five years himself as a financial advisor at Hambrecht & Quist, UBS PWM, and Credit Suisse, Mr. Gershman brings a unique perspective to the recruiting and consulting world of financial advisors. He has built profound relationships through the generations and has fostered deep relationships with his clients on both the broker and management sides. He upholds the reputation of The Gershman Group by continuing to provide valuable consultation and advice to transitioning financial advisors.


Originally published on: https://thegershmangroup.com/the-candid-interview-you-wish-you-heard/


0:00 Intro

0:24 Why Would Andy Speak With A Recruiter?

1:29 Is He The Culture Bearer of ML?

3:18 Ultimate Culture Degradation

5:30 Why FAs Are Leaving? 7: 57 The Model is Broken

11:10 The Shift to Private Banking

14:32 End of Entrepreneurship

15:08 Why Restart Recruiting?

17:36 “Join a Team!”

20:33 What ML Advisors Can Expect?

22:38 It’s Your Clients (.)

23:26 Closing Remarks

First Republic Starts 2023 with a Bang

First Republic has just signed three big-name wealth management teams to its roster in one week’s time to kick off 2023. First, an $11 million in revenue/$1.8 AUM BNY Mellon Boston-based team led by Brenda Travaglini, Michael Corcoran, Dennis Murray, and Dan Gallagher along with three staffers. All four with substantial years under their belt with BNY, Travaglini with 37 years, Corcoran with 34 years, and Murray and Gallagher each with 20 years at the firm. To leave the firm with this many years of service and a salary plus bonus must have been for something special as we’ll get to in a moment.

The second move, is a four-person Morgan Stanley team led by Eric Yamin with 35 years in the business, and Keith Caparelli with 10 years. The $7 million revenue/$ 700 million in AUM team serves clients in New York and Florida. The third movement, the $8 million Wellesley Hills, Massachusetts-based Mohamed-Merola Wealth Management team left Merrill Lynch also for First Republic. Derek Mohammed and Justin Merola each had been at Merrill for 7 years and previously were both at UBS and Morgan Stanley respectively.

Roger Gershman of the Gershman Group, familiar with the teams stated, “First Republic is undeniably a great consideration for advisors on the coasts serving the UHNW client with private banking needs (including direct referrals), the extremely competitive compensation plan is clearly luring advisors to the firm, one after another.”

What is behind these moves and First Republic’s ability to now have amassed 200 top advisors representing over $195 billion in AUM? In 2022 alone, First Republic recruited $12 billion in new AUM.

The upside?

One, First Republic is a premier private bank with pristine UHNW relationships. The bank has been able to negotiate the banking – wealth management relationship well. Some might see this as a negative if they want to be separated from the pressures that come with a bank, some view it as a positive.

Two, the First Republic model allows some freedom and is more entrepreneurial in nature than the firms advisors are leaving yet it isn’t a “go it alone” setup for advisors who don’t want to establish their own RIA firms.

Three, the bicoastal footprint of First Republic works for advisors serving clients in those areas, it might not serve advisors well in the rest of the country.