December 30, 2011 / 5:13 PM / in 7 years

Regional firms trump big brokers in adviser hiring

(Reuters) - Wall Street’s worries did little to stifle the movement of U.S. financial advisers switching firms in the last half of 2011, during which five adviser teams, each managing client assets of more than $1 billion, moved their books of business to a new firm.

In the three months through December, at least 166 advisers, managing a combined $25 billion of assets, moved to a new firm, based on moves tracked by Reuters since October 1. Regional firms were among the winners during that period, picking up on defections from the nation’s top brokerages.

Raymond James (RJF.N), Ameriprise Financial (AMP.N) and Robert W. Baird & Co., all won more advisers and client assets than they lost over the last quarter, while Bank of America’s Merrill Lynch (BAC.N) and Morgan Stanley Smith Barney (MS.N) saw more defections than additions of experienced advisers.

“It’s been a difficult year for the wirehouses,” said New York-based financial services recruiter Rich Schwarzkopf. “They’re burdened with the problems of their parents right now. Since most are owned by banks, it’s been a drag.”


Where big brokerages lost advisers, regional firms gained. The independent broker-dealer channels of Minneapolis, Minnesota-based Ameriprise and St. Petersburg, Florida-based Raymond James allowed both firms to add advisers who moved into the independent space and affiliated with them.

The final quarter of 2011 was Ameriprise’s strongest in more than two years for hiring experienced advisers. The company hired 51 percent more advisers during the period, bringing its total count to to 9,714.

“Advisers are looking at these times right now and saying, ‘am I really comfortable affiliating at a firm that I’m in?’ and that’s creating motivation for advisers to leave,” said Manish Dave, who heads recruiting at Ameriprise.

“It’s becoming more of a normalized environment where people are now looking back and thinking about the other name on their business card,” he said.

While some of the big brokerages saw consolidation among their office branches, regional firms expanded outwards, creating new footprints in pockets of the nation that weren’t previously in in their network.

Raymond James opened new offices in Jackson, Mississippi and Virginia Beach, Virginia, with new hires from Wells Fargo, UBS, and Merrill Lynch. Those advisers managed a combined $800 million in assets at their previous firms.

Indeed, bigger things may be in store for regional firms. Schwarzkopf said they’re likely to grow next year through the acquisition of smaller independent firms.

“Smaller firms will be eaten up by the LPL’s of the world,” Schwarzkopf said, in reference to the Boston, Massachusetts-based LPL Financial (LPLA.O).

Morgan Keegan, the Memphis, Tennessee-based brokerage, remains up for sale by its parent Regional Financial (RF.N). Over the past six months since the sale was announced, at least 16 advisers, managing about $900 million in client assets, have left the firm, but no experienced recruits have been hired.


Many of the biggest moves, based on client assets under management, came from Wall Street’s largest brokerages as they upped the ante on their recruiting packages to attract top producers.

The biggest adviser move this year, in terms of assets managed, came early in November when UBS scored three former Morgan Stanley Smith Barney advisers in Chicago, who together managed $1.7 billion. Ajay Desai, John Staab and Frank Pellicori had produced $8.3 million in revenue in 2010.

“That was a whole branch at one time, and now it’s a whole team,” Schwarzkopf said. “There are brokers and teams moving that probably never had in the past; 25-year guys who have spent their careers at firms are now considering moving.

Morgan Stanley Smith Barney, the firm created nearly three years ago from the merger of Morgan Stanley’s wealth management unit and Citi’s Smith Barney (C.N), scooped its own billion-dollar team from Merrill Lynch in late October.

Harvey Kadden, Mihir Patel, Randy Knopp, Tim Baker and Chris Barber, who managed $1 billion in client assets at Merrill, joined Morgan Stanley Smith Barney in New York City.

A few days later, Merrill said it hired two former Credit Suisse advisers who managed $1.2 billion in client assets. Bruce Lee and Jim Hoesley joined Merrill in Chicago.

“There’s continued growth in the up-front premiums placed to get groups in,” said Tom Lewis, a New Jersey-based attorney with Stark & Stark who has transitioned about 1500 brokers switching firms over the past 20 years. “UBS hears what Merrill Lynch is paying, and they all rise to that level.”

Lewis said recruiting packages have reached 300 to 400 percent of a broker’s annual production, including up-front and back-end bonuses, whereas ten years ago, a 50-to-100 percent package was considered healthy.

“At some point, these types of deals are going to be taken off the table,” he said.

Reporting by Ashley Lau, editing by Bernadette Baum

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