Recruiting Shift: UBS And Rockefeller Significantly Outpace Rivals Using Different Narratives

It is an understatement to say that the Covid-19 pandemic ‘changed’ wealth management habits for both firms and clients. Simply claiming changes doesn’t do it justice. Some serious shifts took place and the initial results as it relates to recruiting are beginning to become very clear.

A reduction in costs and overhead associated with hard asset real estate seems to have been shifted to recruiting budgets and high-quality, tenured advisors and teams are benefitting in ways the industry has never seen before.

Specifically, elite (those listed on Forbes and Barron’s lists) teams are defaulting to what is familiar, if not a smidge smaller in scale. As of this writing, two firms have taken a significant lead in the recruiting economy: UBS and Rockefeller.

The case for UBS looks like this – the global leader in wealth management, resources that rival anyone in the industry AND they’ve decided to remove any and all hurdles from their deal when recruiting from traditional rivals (MS, WF, ML). That narrative has never been heard or seen before and it is having a massive impact. **read that again, no hurdles in their deal.

Rockefeller, on the other hand, has become the ‘Goldilocks’ of the wealth management world. Not an independent or hybrid, killer tech platform, a legacy brand name that seriously resonates with HNW and UHNW clients, and a commitment to bring on big teams that are uniquely respected amongst their peers.

What we’ve seen has become a pattern in 2021. The commitment by UBS to go with a no hurdle deal has been a brilliant decision by their leadership, and the Rockefeller name and culture continue to be an easy ‘yes’ when advisors of distinction are approached.

Ultimately, the numbers tell the story: UBS and Rockefeller are leading the recruiting pack by double their closest competitors. Both firms claim asset transfer numbers in Q1 of better than $8B. First Republic and Morgan Stanley are hovering around $3B. A massive gap.

Given that wealth management recruiting is the ultimate ‘capitalism economy’ and assets and revenue flow to the best and brightest – digging deeper with both firms should be on any curious advisors list.

UBS is able to offer

UBS keeps stacking up JPM Private Bank teams across the country. Another one just dropped as we were passed a note moments ago. This makes the third sizable move from JPM to UBS in the past six months.

Ryan Bristol and Patrick Schaffer are migrating to UBS in Los Angeles as this article is being penned. The team manages $2.5B in ultra-high net worth assets for clients and generate better than $26M in annual revenue. These moves follow large teams and assets of scale from JPM to UBS in Miami and Atlanta. And our intel tells us that the path from JPM to UBS is set to be followed by others.

Some background gives some context to the ‘why’ behind this move and others. JP Morgan Private Bank advisors manage huge books of assets and generate equally massive amounts of annual revenue – yet they get paid peanuts by way of an annual salary and a ‘subjective’ bonus at the end of each year. No comp grid whatsoever. JPM Private Bankers are, by any measure, wildly under-compensated.

UBS is able to offer teams like this a grid that pays them 50% of every dollar in revenue generated, plus a recruiting deal, and a retirement deal that is the envy of the industry. The numbers are remarkable and have opened the eyes of teams like Bristol and Schaffer. What follows seems to be speedy due diligence and asking questions like ‘why not’ instead of ‘why’ leave JPM.

The Grand Canyon-sized gap in overall cash compensation is hard to believe at first – JPM Private Bankers aren’t used to being treated like the belle of the ball. Once they verify the numbers, the philosophical debate is relatively short.

Digging a bit deeper into the work UBS has been doing in the ‘private banking’ space a clear pattern has developed. They are being aggressive with JPM, Goldman Sachs, and Alliance Bernstein. Take a look at the moves over the past six months:

– JPM Atlanta – Jeff Lewis and Steve May $20M
– JPM Miami – Brian Beranha and Vincente Del Rio $8M
– Goldman Sachs DC – John Hanley $9M
– Goldman Sachs Philadelphia – Scott Belveal and Adam Lambert $7.5M
– Goldman Sachs Boston – Denis Cleary and Greg Devine $20M
– Alliance Bernstein All Locations – moves that equal $40M

Again, the above moves have formed a clear pattern. For the likes of Ryan and Patrick, the difference in culture and ecosystem was reason enough to make the move. Will others follow? Count on it.

UBS Rumors Only Add To Attrition Issues – Large Teams Step Up Exit Due Diligence

UBS has been losing advisors for more than two years now. The firm has teetered on the brink of falling below the 6k headcount mark across the US for several quarters. Two years ago, that number was above 7k. Attrition at the firm, amongst its most productive advisors and teams, is a real problem.

In discussions with sources at the firm, the internal numbers are even worse. Currently, over the past year, only two managers in the entire country can claim a ‘net-plus’ number in headcount/recruiting. Even managers that have recruited well have lost more than they can bring in. Again (and to make the point clear), 95% of UBS branches and complexes have fewer advisors, assets, and revenue than they did a year ago.

And it’s about to get worse.

The revelation that UBS brass is seriously considering a merger with Credit Suisse (or any other potential sizable global bank) has the best and the brightest at UBS understandably spooked. Forget about the industry planted articles claiming that “not much will change for UBS Americas advisors in the event of a merger” – you know better than to believe that drivel.

Any serious industry veteran will tell you that a Credit Suisse tie-up will most certainly have ripple effects (at best) that are felt here in the US. Advisors could be forced to tie themselves to the firm with a fresh new retention deal, with plenty of non-protocol (read: non-compete and non-solicit language) legal hoops to embrace. And the value of the retention deal with be less than half as lucrative as any competitive recruiting offer. Comp will be adjusted down again in the coming years, management reduced (again), and the pivot to a private banking framework will be on the march.

The best and brightest at UBS understand this and are smartly evaluating their options. Meetings and phone calls have increased and the pipeline of firms like Rockefeller and the First Republic and bursting at the seams with UBS teams.

As a quick final thought for current UBS employees – do you think that Merrill Lynch advisors have enjoyed that last decade of changes at their vanishing brand? No, no they haven’t.

UBS Uncertainty – Merger Discussions With Credit Suisse Surface, Advisors Should Prepare For More Change At The Firm

Over the weekend it was discovered that UBS leadership has been considering potential merger partners, and Credit Suisse was specifically named. A like-minded Swiss firm that has already divested its US wealth management operations several years ago. The report claimed that the talks have been exploratory in nature and nothing is imminent or definitive, but this news begs a whole lot of questions.

What to make of it with respect to UBS advisors here in the US? How would a merger, of any kind, potentially affect advisors and teams that have continued to remain loyal to the UBS brand? Speculation could take this conversation anywhere, so let’s take some of UBS’ recent moves and put them in the context of a potential Swiss mega-merger.

First, there has been a tremendous amount of ‘cost-saving’ window dressing in the past couple of years at UBS (both here in the US and globally). A protocol exit was accompanied by a significant drawdown in recruiting bonus balances that sat on UBS’ balance sheet. The decision to exit the protocol meant that UBS was more comfortable litigating any move away from the firm as opposed to competing in earnest on the recruiting field of play.

Second, UBS has been furiously recruiting private bankers from Goldman Sachs, Alliance Bernstein, and even J.P. Morgan. They’ve pulled more recruits from the banking ranks than other channels so far in 2020. This is telling when you put in the context of creating a potential Swiss banking monolith that would be UBS + Credit Suisse. Where is the wealth management compensation model headed, longer-term, at UBS? If you pan out the writing seems to be on the wall.

Third, UBS is about to implement the announced comp grid changes that increase hurdles by 20% across the board to earn the same level of comp advisors have earned in the past. In other words, increasing unit profitability as the firm ‘explores potential strategies’ that could find itself either executing a mega-merger or selling different pieces of itself to meaningfully push up its value i.e. stock price (which many of you know hasn’t moved in a meaningful way in years).

The report itself comes from Bloomberg news, here is what they reported:

“UBS Group AG Chairman Axel Weber has been studying the feasibility of a mega-merger with rival Credit Suisse Group AG as part of a regular thought-exercise on future strategic options, according to people familiar with the matter.”

“UBS, the world’s largest wealth manager, has been exploring the question with consultants but it hasn’t raised the topic at the level of the executive board, the people said. The assessment is part of regular internal planning procedures and there are currently no formal discussions going on between the two banks, said the people, who asked for anonymity because the information isn’t public.”

“Both banks declined to comment. Speculation about a deal was stoked earlier Monday when Swiss finance blog Inside Paradeplatz wrote that Weber and Credit Suisse’s chairman Urs Rohner could agree on a merger as early as next year. Both banks declined to comment on the report.”Bottom line, where there is smoke there is always fire. If it isn’t a Credit Suisse merger, something else is afoot. More change is coming to UBS and it will trickle down to advisors that are employed by the firm. It will be quite interesting to see if this type of news furthers the current trend of larger teams leaving UBS for greener (and more stable) pastures.


Goldman Sachs Donut Hole: Advisor Payouts Much Lower Than Previously Believed

Goldman Sachs has an interesting problem on its hands. And it’s a problem that many of its rivals are becoming more and more comfortable exploiting over the past 6-9 months. The problem is one word: payout. It is much worse for Goldman advisors than previously believed.

It has been well known in wealth management circles that Goldman Sachs pays its wealth managers a stunted grid for a couple of reasons – the brand name that brings deep-pocketed clients to the firm, and the deals that flow through one of (if not ‘the’) the most exclusive and well-kown global investment banks in the world. Advisors benefit from both; because of that Goldman essentially caps payouts at 30% for even the best of its earners.

But that isn’t the entire story. A full 25% of an advisor’s grid payout is tagged as deferred compensation. So the top end grid payout is actually closer to 20% – less than half of what some of the best earners at Morgan Stanley, Wells Fargo, First Republic, and others are paid on a monthly basis makes its way to the paychecks of Goldman Sachs wealth managers.

That real disparity is why you are seeing an uptick in “Goldman Sachs team move to …” headlines across the wealth management industry. UBS has been aggressively recruiting Goldman teams and has found significant recent success. The success UBS has had has spurred the interest of other firms in the wired category.

Goldman teams are not being discounted as they once were. Their value is attaining a ‘par value’ alongside other recruited wirehouse teams that firms are engaged within the current environment. The opportunity for Goldman advisors to explore their options have gotten remarkably profitable – in both the short and long term.

Keep an eye on movement out of Goldman; we expect it to continue.


Wells Fargo Adds Big UBS Producer In SF; Wells PWM Continues Current Momentum

A couple of narratives continue to plant flags in the current wealth management environment. UBS keeps losing advisors of note and Wells Fargo remains aggressive in pursuing and winning them. In spite of UBS’ protocol exit and efforts to retain legacy advisors, there seems to be too much overhang from missteps early in 2020 that are convincing advisors to seek greener pastures.

More of that happened today in San Francisco, CA as Craig Issacson moved to Wells Fargo in the city. Weighing in at just north of $1M in annual production and better than $120M in client assets, Wells Fargo won the prize as it competed with other firms of note in its category.

The Gershman Group CEO, Roger Gershman commented briefly on today’s move, “The Wells Fargo PWM opportunity is significant and lucrative. It continues to resonate with advisors up and down the spectrum. They are appropriately aggressive for the right advisor and team.”

As Wells Fargo remains aggressive in the recruiting space advisors continue to get more and more comfortable with the executive changes that have been made this year, as well as the depth and breadth of the offerings at the bank itself. Juxtaposed against the likes of UBS, Wells offers several pathways for advisors and the opportunity to move in and around their ecosystem.

As an example, at a minimum Mr. Issacson inked a deal worth 300% of his current annual production, while also having the opportunity to add another +200% should he decide to sunset his business within the Wells Fargo system. Or…he can choose to go independent within Wells’ framework should he choose to do so at the end of his current deal. Having options on top of a sizable stack of recruiting cash resonates.

Proof of that narrative is found in Mr. Issacson’s move today.


UBS Exodus Continues with Steven Mitchell RIA Transition

On Monday, Steven J. Mitchell became the latest in an ever-growing list of UBS brokers to declare independence this year. Reuniting with former UBS colleague Phil Fiore, Mitchell joined the New York City office of Procyon Partners, an RIA established in 2017.

“I was always intrigued by the RIA and independent space,” Mitchell stated in an interview. That intrigue was no doubt enhanced by his new partner’s success. Fiore has grown client assets to over $3 billion in the past three years since he started the firm.

UBS isn’t crying foul over the move, but they are throwing some shade. Mitchell was discharged from the firm in May for failing to complete mandatory training modules. Fiore was asked to leave in 2016 after violating rules on disclosing client-related outside business activity.

Is this a case of two rogues banding together or a warning sign of systemic problems at UBS? Earlier this month, the multinational investment bank lost six wealth management brokers in three regions. Cumulatively, the six were managing roughly $800 million in client assets.

The Sensational Six UBS Defections in July
Christopher McAdoo and Richard W. Humphrey exited the UBS Clearwater, Florida office to join Steward Partners, an independent RIA that custodies with Raymond James. They were brought on board by Dean Hoover, another former UBS advisor who left in 2018.

Tyler McKean and Steven Hafner jumped ship in northwestern Ohio to join True Alpha Wealth Management. That two-year-old firm was founded by former Merrill Lynch advisors. McKean is listed on the Forbes Best-In-State Wealth Advisor list. Both advisors left UBS voluntarily.

Finally, Troy Elser and Ryan Gutowski went over to Bethesda, Maryland RIA Seventy2 Capital Wealth Management. They’re affiliated with the Wells Fargo Financial Network (FINet). The founder of Seventy2, Thomas Fautrel, was an SVP at Morgan Stanley until 2016.

Anomaly, UBS Internal Issues, or Industry Downtrend?
Since the beginning of this year, the total number of US brokers for UBS declined from 6050 down to just under 6000. Is this an anomaly or an industry downtrend? One could assume that it’s due to internal problems at UBS, but they are not the only bank losing brokers.

Registered investment advisory firms are putting a package on the table that’s hard to resist. Kestra Private Wealth Services, for instance, the umbrella RIA for True Alpha Wealth Management offers to pick up infrastructure costs and provide supplies and equipment.

Of course, transitioning from a wirehouse means sacrificing higher payouts. Raymond James’ independent advisor channel offers a complete software suite, including a client portal and online reporting, that is superior to what most advisors see at UBS, Morgan, or Merrill.

Despite the recent exodus of some of their top advisors, UBS does not lead the pack in RIA defections. That honor still goes to LPL, but they have 14,000 advisors on their platform, so it’s to be expected. Due to recent developments, that is also likely to change.

On February 12th, Dan Arnold, CEO of LPL, announced plans to transition a portion of LPL’s resources to offer a pure RIA option for their advisors. Fee-only advisors once turned away for the hybrid model LPL developed, will now be eligible to join the firm.


Merrill Lynch Shuffles Deck Chairs In NYC; Names New Market Head But Eliminates Another Complex

Merrill Lynch keeps shrinking. Across the US ‘real’ advisor headcount (not BofA bank branch advisors and Merrill EDGE hires) has been in decline since 2010, a decades-long run, and regions, complexes, and markets have shrunk as well. Another example of this was just announced in the financial capital of the world – New York City.

In a memo sent to advisors and staff a former UBS manager was named as the new ‘market executive’ in the firms Rockefeller Center branch; a branch known to be a bellwether for the BofA/Merrill brand. Mr. Correa was hired last year away from UBS. Mr. Correa transfers over from Merrill’s Park Ave branch and replaces the interim market executive Courtney McCarthy. The moves were announced by the Fifth Ave complex manager Matthew Grossman.

Also discussed in the memo from Mr. Grossman, besides the announcement of Mr. Correa’s arrival, was the shuttering of the Manhattan East complex that Mr. Correa had just left. That complex would be merged with the Fifth Ave complex and be redubbed Manhattan Central. Is anyone else’s head spinning??

The upshot is that Merrill Lynch is consolidating complexes, reducing manager headcount, and dealing with large-scale departures in locations that used to be the envy of every wealth management brand in the world. Now, it is nothing more than the shuffling of deck chairs to satisfy the bean counters at Bank of America. Profitability, costs, associated bank product sales, loans, and household quotas matter more than the brand and the people that work within it. Another adjustment to a flagship complex (shutting it down completely) is just more proof of that.

So to recap, the Rock Center complex was shut down, merged with Manhattan East, named Ken Correa the new ‘market executive’, but is managed by Matthew Grossman, while the former interim ‘market executive’ Courtney McCarthy is demoted to Associate Market Manager. Got it? Good.