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SOURCES: Morgan Stanley Is Asking (Forcing) Large Teams And Their Biggest Producers To Sign Retention/Retirement Bonuses

In conversations with two different sources ‘in the know,’ we’ve learned that Morgan Stanley is asking their largest producers to sign what sound, look, and smell like retention bonuses but are being sold as retirement compensation.

Here is the setup from one of our sources:

“Morgan Stanley is telling advisors/teams above $5M to take a payment of 100% of their current T12 and connecting it to their retirement deal. In other words, take about half of your retirement deal (which is 220%) now and sign this document that you are staying and keeping your business here at Morgan Stanley.”

“You can imagine what the unspoken consequences of not signing that deal look like to management. If you don’t take the cash it signals that you are more inclined to leave the firm than stay. Now you’ve got a target on your back. If you dot and I or cross at wrong you’ll get fired. That’s the intention here. So this isn’t a retirement bonus, but rather a retention scheme.”

We spoke to another source that backed up these claims. All of this is being done in a very quiet, closed doorway with the firm’s largest producers. And Morgan Stanley has set a precedent over the past year that they won’t blink in firing big producers – not just for industry violations, but rather internal firm policy violations.

As, effectively, the biggest firm on the street Morgan Stanley management can make these moves. They can put this kind of pressure on advisors and not worry about the cultural implications. Keeping it ‘niche targeted’ to its top 10% or so of producers makes it seem/feel almost like a perk.

Take a step back and consider the cost. What sounds to good to be true probably is – a financial firm doesn’t give money away for free. Think about it.

BIGGEST LOSERS! The Biggest Names In Banking And Wealth Management Are Getting Crushed

You would think that name recognition and brand value would still hold some sort of sway in this industry. The numbers tell a different story altogether.

The biggest losers when it comes to high-level talent in wealth management are some of the biggest names banking and wealth management has ever seen: J. P. Morgan, Merrill Lynch, and Morgan Stanley. All of them are taking historic talent losses and client assets are following them out the back door.

But it isn’t all about the headline. Each of those firms is ‘losing’ for very different reasons. Let’s deconstruct the dynamics of each firm.

1. J. P. Morgan – compensation and culture are the big problem here. UBS has decided to exploit those pain points for headliner Managing Directors across the country at JPM. It has worked flawlessly. Yes, recruiting deals and ongoing compensation are leading the conversation; but culture and JPM leadership being completely unable to stem the tide is a bigger issue. Outlook – systemic issues with no end in sight.

2. Merrill Lynch – a slow bleed connected to a cancerous host that is Bank of America. They changed the name to ‘Merrill’ and loaded up advisors with bank products. Every meaningful team that remains at ML is either in discussions to leave or has signed retirement deal paperwork and grinning and bearing it. Outlook – the thundering herd has been slaughtered.

3. Morgan Stanley – this story is very different than the two above. MS attrition is just that; a function of industry churn at the biggest firm on the street. Taking a closer look,
Morgan Stanley has recruited just as many teams and client assets as they’ve lost so far this year. This isn’t a culture problem or a management problem; rather an industry problem. Outlook – current talent drain will slow.

These firms are as high profile as they come and it’s a great study in culture. The way they are responding to the talent losses is very, very telling. BofA/Merrill just doesn’t seem to care, which projects institutional malaise and that the division is not integral to the larger entities’ success. JPM has no idea how to deal with what is going on at the Private Bank; which proves institutional arrogance (and incompetence). Morgan Stanley is dealing with losses by aggressively recruiting from its competitors, proving that the current trend at that firm will subside.

Three biggest losers, three different narratives, three different outcomes.

Keep An Eye On The Uptick In Morgan Stanley Recruiting; Dallas Merrill Team Another ‘Competitive’ Win

Morgan Stanley isn’t grabbing all of the recruiting headlines in wealth management these days, but their trajectory is worth noting. Their latest win in Dallas is notable given the competitive nature of the bidding versus rivals old and new.

The terms of the deal haven’t been disclosed but landing a Merrill team doing $5.5M in annual production these days is no small feat. Merrill may be the most heavily recruited ‘away’ firm on the street right now, so every ML situation is competitive.

The group that migrated to Morgan Stanley in Dallas is captained by 39-year vet John Calandro along with his brother and son, Kevin Calandro, and Rob Calandro. They manage more than $720 million in client assets and brought with them admin staff Shea Self and Jonathan Hicks as well as Redding May.

Now here is the competitive bidding part of it – this was a three-horse race. UBS and Rockefeller were both heavy contenders for this team’s services and pushed their deals higher.

A source close to the negotiations had this to say, “each firm had pushed their deals and deal structures to the limit and well past 300%, ML teams are commanding premiums right now.”

And there is the money line: Merrill teams are commanding premiums right now. Including deferred comp balances, the Morgan Stanley deal breached the 350% number. Cha-Ching!!

Morgan Stanley will continue to be aggressive and maybe the ‘belle of the ball’ for the second half of 2021. Get your popcorn ready.

Private Bankers Listen Up! The Difference Between Deals Offered By UBS And Morgan Stanley

Two firms have made the biggest impact in recruiting private bankers away from J. P. Morgan, Goldman Sachs, Bank of America, and Citi. Both UBS and Morgan Stanley have decided that recruiting a different subset of teams from firms that could be called ‘non-traditional’ is worth every dime they can spare.

So what is the difference between what UBS and Morgan Stanley are offering these teams? **a quick reminder that UBS has been significantly more successful in their pursuit of private bankers by nearly 4x versus Morgan Stanley.UBS and Morgan Stanley are near equals when it comes to product, platform, and comp grid payout. The difference lies in the valuation of the business and client relationships that private bankers have built over a number of years.

Here is the money line: UBS is offering a deal based on the gross annual revenue (think ‘scorecard’ or ‘gross credits’) of a private banker or team, and Morgan Stanley is making their offer based on the net revenue (W-2).

Let’s break it down a bit. Currently, UBS will look at a gross credits annualized report for a Goldman Sachs team and put together a 250% deal on the top-line numbers. If that number is $10M, then the deal turns into a $25M deal in an instant.

Morgan Stanley (focused on the net number) will ask that same team for their W-2’s and construct a deal based on the lowest common denominator associated with the ‘trickle down’ revenue model for a Goldman Sachs team. A $10M team at Goldman will have W-2’s that will show +\- $1M. A 250% deal based on ‘net’ numbers ends up making out at $5M.UBS = $25MMorgan Stanley = $5MThe dramatic difference in those numbers makes it crystal clear why UBS is winning private banking competitive recruitment 4-1. Evaluating competing deals that are separated by 5x generally makes the decision simple.

As of today, UBS is the clear choice for private banking teams.

JP Morgan Private Bank Source – “It’s chaos around here, nobody knows how to respond…”

Take a quick look at the latest numbers associated with transitions from one firm to another across the industry – it’s a bloodbath. J.P Morgan Private Bank and J.P.Morgan Securities are getting their collective teeth kicked in. The world’s most prominent bank is getting hammered week after week and month after month, with what looks like an accelerating pace at the moment.

Between UBS and Morgan Stanley, the predominant buyers of ‘banking’ teams in the wealth management space, JPM has lost more than $30B to UBS and another $5B to Morgan Stanley.

A couple of quotes were given to us by a current JPM private banker and a source at UBS that seems to sum up the current state of things at Jamie Dimon’s shop:

“It is chaos over here right now,” said our source at JPM, “they are trying to patch up gaping holes with the type of rhetoric usually reserved for therapy, and making monetary promises about end-of-year bonuses that aren’t attached to any guarantees or paperwork.”

“JPM management feels a lot like the end of the movie ‘Miracle’ right now”, said a source at UBS. “The US team coaches, as time wound down, couldn’t understand why the Russians weren’t pulling the goalie in the last minutes while trailing. Ultimately they realized that the Russian coaches and team were so shocked to be in a losing position that they didn’t know how to respond. That’s JPM Private Bank and their management right now, they have no idea what to do.”UBS in particular has found a silver bullet for landing private banking teams and the ‘asset transfer’ ledger is proof. They are leading all the recruiting ranking this year by a figure of nearly 4x the firm in the second position (Rockefeller).

So far JPM’s response financial response has been tepid at best. Rumor has it that senior bankers are getting promises of $100k increases in year-end bonuses and larger percentage-based salary bumps. That ain’t gonna get it, dude. The exodus will continue.

J. P. Morgan Private Bank Loses Another Team; Morgan Stanley Grabs $3B Group In Salt Lake City

Another week, another headline associated with a departure from J. P. Morgan Private Bank. David Frame, CEO of J. P. Morgan’s Private Bank, is having a really, really tough year.

The latest team to tell JPM to kick rocks hails from Salt Lake City, Utah. That effectively closes the loop on Private Bank departures across the country for JPM. Other departures have been announced in LA, Miami, Dallas, Atlanta, NYC – and stay tuned for the next three to four that aren’t far behind. You can bet your ass that David Frame and his management minions are having as many meetings as they can stand to figure out how to stop the bleeding.

The details of the Salt Lake City team that migrated to Morgan Stanley are as follows: Brian Swenson, Eric Smith, and Jesse Bohannon including staffers Melissa Sende and Charlotte Painter. They walked out with $3 billion in client assets, and have joined Morgan Stanley’s PWM division after their 90-day garden leave.

Over the past six months, if you are scoring at home, JPM is closing in on losing nearly $50B in client assets from the Private Bank. Again, executive leadership is in serious trouble. You can’t hemorrhage talent the way that’s been happening there without some level of accountability. Keep your eye on that dynamic as well.**a side note – we are chasing down the kind of deal Morgan Stanley is offering private bankers. We know what UBS is doing, but as of this print, Morgan Stanley is still offering private banking recruiting deals based on W-2 revenue. If that changes, you’ll be the first to know.

Morgan Stanley Is Missing The Private Banking Opportunity; Head of Recruiting Ben Firestein Says “Not Interested”

Several firms have decided to absolutely feast on private banking recruiting so far this year. The ranks of J.P. Morgan, Goldman Sachs, Bernstein, and Citi have been migrating to rivals UBS with a smattering finding their way to Merrill and a few others.

In fact, over the past 120 days. UBS alone has announced nearly $10B in private banking assets from J.P.Morgan and Wells have migrated to the firm. Another $5B, in that same period, has moved to First Republic and Merrill.

So where is Morgan Stanley?

In a conversation passed to us from a recruiter who asked to remain anonymous, Morgan Stanley has eschewed private banking recruitment unless the bankers have an interest in taking a greatly reduced ‘W-2 based’ deal structure. The quote we were passed from Ben Firestein, National Director of Recruiting for Morgan Stanley:

“We’re not interested in competing for private bankers at those valuations. We can’t get anywhere near those numbers.”

That begs the question, what are ‘those numbers’ that Mr. Firestein is staying away from? UBS specifically is doing deals that focus on private bankers score cards rather than their W-2 numbers. That makes the deals remarkably more lucrative than anything it’s competitors are offering. When we say more lucrative we mean 4-6 times more lucrative. A 20 year vet from a private bank would be offered a $2.5M deal from Morgan Stanley, whereas UBS is offering a $10M deal.

That’s not in the same universe, and it gives context to the language used by Mr. Firestein when he said “…not interested in competing”.

It’s an interesting calculation made by Morgan Stanley versus its rivals. Some might say that in the wealth management space Morgan Stanley may not see a meaningful rival at the moment. Wells Fargo is limping along, Merrill/BofA is a shell of its former self, and UBS is a boutique compared to the scale of MS.

Still, recruiting moves in cycles, and the numbers being put on the board at UBS won’t go unnoticed. If we had to place a bet, at some point Morgan Stanley and Mr. Firestein will change his mind.

If/when that happens, expect private banker recruiting to absolutely explode.

Morgan Stanley Fires First, Asks Questions Later – Welcome To The New Normal

Morgan Stanley has taken over as the largest and most powerful wealth management name in the world. Merrill Lynch used to hold that venerable distinction, but they cucked it up during the financial crisis and have continued to do so ever since.

Morgan Stanley is now the 800 lb gorilla of the industry. The most advisors (EDJ doesn’t count), global reach, international platform, name, history, performance, big recruiting deals… its big boy wealth management and finance.

Which is why they seem to be emboldened when it comes to recklessly firing long-tenured advisors and scratching through the rubble after the fact. The play, if you will, is that the discharges brokers don’t have the means or long suffering to engage in a years long wrongful termination suit with a global financial institution.

Lately, the firings have had to do with the sun setting of retiring brokers accounts and how revenues were split between parties. Instead of speaking to the advisors that had retired regarding the arrangements that had been made, Morgan Stanley simply executed a ‘fire, ready, aim’ legal strategy.

The firm keeps the larger share of the assets, the agreement is nixed and they employ a ‘dare ya’ legal strategy betting that the parties won’t pursue damages to their career and earnings.

Sound like a firm you want to work for?? Listen, these aren’t the kind of indefensible crimes associated with stealing funds from customer accounts to bolster ones lifestyle; rather, agreements between advisors that have long since retired.

Compliance justifying their own existence, and management going along for the ride.

Instead of believing your firm thinks you’re the greatest thing since sliced bread… we’ve said it many times before; be vigilant in how you protect yourself legally.

Morgan Stanley Tightens The Noose, Fires Billion Dollar Advisor In NJ

At times we’ve discussed the nature of regulatory action in the wealth industry as being increasingly proactive. The Tom Buck saga is ‘Exhibit A’ for regulatory overreach and eventual incarceration. Did something similar just go down at Morgan Stanley in New Jersey?

Here is what happened:

David S. Weinerman was fired Tuesday for what Morgan Stanley called “firm policy violations” that did not relate to customer accounts. Given that the allegations aren’t related to customer accounts makes this case different than Tom Buck. Still, the size of Mr. Weinerman’s business is of real interest.

Weinerman had been managing more than $1 billion in assets and turning it over to the tune of $4 million in annual revenue. Another marker in the ‘we don’t care how big you are’ regulatory movement.

Mr. Weinerman was #6 on Forbes’ list of top New Jersey advisors this year. Of real interest, he has no customer complaints or regulatory disclosures.

So Morgan Stanley seems to have fired a previously perfect advisor with a billion in client assets for reasons having ZERO to do with customer accounts.

This doesn’t pass the proverbial smell test. What it does do is serve as another reminder to retain your own PERSONAL counsel and institute policies on and around your own team that go beyond company policies. Don’t use email, have your admin team do it on your behalf. Tread lightly, be more politically correct, stay away from younger staffers (or don’t hire them at all), and hire an internal ‘compliance liaison’ on your team so you don’t miss anything.

Nobody is safe in an active corporate and regulatory environment. Nobody. Just ask David Weinerman.

Morgan Stanley Exec: “Deals are at all-time highs, we are being very aggressive…”

In several discussions with Morgan Stanley executives last week we got an insider’s look at the firms recruiting priorities and the status of who/how they are recruiting. Some of it was predictable, in a competitive recruiting landscape; while other parts of the conversation were remarkable.

Here is a download of what we heard and how we interpreted it:

“Look, markets and client assets are at all-time highs and as a corollary, deals are at all-time highs. We are willing to be very, very competitive for the right teams in money center cities. We realize they are in high demand so we are doubling down on doing our best to put offers in front of them that make it nearly impossible to say no.”

“That is the current state of recruiting right now. Competitive doesn’t even begin to explain it. Our reputation of tech is playing a meaningful role in winning battles, but let’s be honest here – upfront bonus dollars is what recruits are in the game for – and pressing upwards of 150-175% is the game right now.”

“The most competitive bids? No doubt is Merrill PBIG teams. They want to leave and everyone knows it. They are tired of the BoA bullshit and are shopping. Not window shopping, legit price comparisons. We liken ourselves to Amazon, and we won’t hide from being the biggest firm on the street (in our category). We are perfectly comfortable with the give/take in our pitch.”

Our take…Morgan Stanley is a philosophical choice. It’s one or the other – being able to understand that with scale comes a certain amount of institutional baggage. But that baggage also carries the reality that there isn’t a box that can’t be checked for the biggest and best clients. Ergo, no compromises on the client-side.

The dollars associated with that choice – in the words of a well-known politician “bigly”.