Economy & Finance

Wall Street has fewer bolting brokers amid stronger markets

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NEW YORK (Reuters) – Fewer Wall Street brokers appear to be jumping ship in 2013, as strong markets kept more teams in place in the first quarter, financial-services recruiters said this week.

Some 109 teams, most with two to three veteran advisers each, took $23 billion in client assets to rival firms or their own shops during the first three months of the year, according to a Reuters quarterly review of broker movements.

That is down significantly from the same period last year, when at least 147 teams of veteran brokers on the move shifted more than $33.8 billion in client assets. Roughly half of the $23 billion assets were managed by advisers who departed Morgan Stanley’s wealth management unit.

“This is not a prime recruiting environment right now,” said San Diego-based financial services recruiter Ron Edde, of Millennium Career Advisors. In times of strong equities markets such as the current one – with the benchmark S&P 500 Index gaining more than 10 percent since January 1 – advisers typically stay in place, Edde and other recruiters said. “They don’t want to upset the apple cart” when everything is going well.

New York-based financial-services recruiter Rich Schwarzkopf agrees. “Firms are more cautious, and brokers are more cautious. There’s no emergency.”

The slowdown in movement may be good for big firms that want to keep top advisers in place. Advisers who manage significant pools of client assets are key to the wealth management businesses of major firms because of their ability to produce significant revenue.

Roughly $1 million in annual revenue is typically generated off of $100 million in assets- Reuters tracks advisers and teams that manage at least that much.


At least nine teams that each managed more than $500 million in client assets moved during the first three months of the year. In years past, the number of teams of that size making a move could be counted on one hand, industry experts say. Included in this year’s count are three teams that managed around $1 billion or more in client assets.

And the bigger a team is, in terms of client assets managed, the more moving parts there are involved in making a move – which can lengthen the time it takes for a team to make a decision.

“There are fewer brokers making shifts, but some of the ones that are talking (about making a move)… are the bigger brokers” that generate those $1 million or more in yearly revenues, Schwarzkopf said.


Almost half of the $23 billion in assets were managed by adviser teams departing top U.S. brokerage Morgan Stanley Wealth Management, which lost at least 41 teams of veteran advisers managing more than $10.4 billion in client assets in the first quarter.

The second-biggest outflow of advisers came from Bank of America Corp’s Merrill Lynch, which lost at least 16 teams of veteran advisers who managed around $4.3 billion in client assets. That total is down roughly 70 percent from last year, when Merrill lost at least 34 adviser teams that managed more than $14 billion in client assets.

“A lot of blue-chip teams have been contacted or solicited to leave over the last year or two,” said New Jersey-based lawyer Tom Lewis of Stark & Stark, who works with advisers in transition during their moves, referring to those with between $500 million and $1 billion in client assets.

Among the four largest U.S. brokerages – Morgan Stanley, Merrill, Wells Fargo Advisors and UBS Wealth Management Americas – each picked up at least one team that managed more than $500 million in client assets.


Many of the bolting brokers pointed to the desire to go independent or join a smaller firm that would allow more control over decision-making for their clients, based on interviews with advisers following their departures.

“We just felt this is a direction the industry is moving,” said former Merrill Lynch broker James Maher, who left Merrill to open his own independent practice with Dynasty Financial Partners, a wealth management start-up firm based in New York. He told Reuters he wanted access to a broader range of investment choices for clients than he had at Merrill.

Many big teams like Maher’s, which managed $420 million in client assets, have chosen to go independent – which, despite having greater upfront overhead costs, can lead to a higher payout.

At least four veteran adviser teams in Maryland, New York and Pennsylvania went independent with HighTower Advisors LLC, an adviser-owned firm that works with advisers who want to own their own practice. The teams, which together managed more than $1.3 billion at their old firms, came from Morgan Stanley, Merrill and UBS.


Among the regional firms that made several big hires during the first quarter are Milwaukee-based Robert W. Baird & Co, which scored at least 14 veteran advisers who managed more than $1.4 billion at their old firms, and St. Louis-based Stifel Nicolaus & Co, which added at least eight veteran advisers who managed roughly $640 million in client assets.

Some firms, like Philadelphia-based Janney Montgomery Scott LLC, are expecting to increase their hiring later in 2013.

“The pace of hires was slower in the first quarter than we would have liked to see,” Janney Montgomery Scott’s private client group president, Jerry Lombard, said in an interview in early April, “but April will probably exceed” the hiring activity from the first three months of 2013, he said. A lot of deals that were in the works earlier in the year will come to fruition in the second quarter, he said.

If the stock market calmed down, there could be more moves in the offing, recruiters noted. Brokers tend to sit tight during bull markets, when everybody is happy, but also during bear markets, when they fear disappointed investors would balk at moving with them, said Edde. “It’s best when markets are relatively flat.”

(Editing by Linda Stern and Matthew Lewis)

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