WealthManagement Magazine

Firms Vie for Wholesalers

Aggressive recruiting has extended to wholesalers these days, with firms paying big up-front bonuses and guarantees to those familiar with wirehouse distribution systems.Bonuses are common among brokerage firms, where a broker's book of business is a valuable asset, but hiring away wholesalers with such fervor is almost unheard of."They're going after our books," says Gerald Pinkerton, director of

Aggressive recruiting has extended to wholesalers these days, with firms paying big up-front bonuses and guarantees to those familiar with wirehouse distribution systems.

Bonuses are common among brokerage firms, where a broker's book of business is a valuable asset, but hiring away wholesalers with such fervor is almost unheard of.

"They're going after our books," says Gerald Pinkerton, director of marketing at MJ Whitman in New York. "There is so much business out there that they are going after almost everyone." Pinkerton, an experienced wholesaler with more than 20 years in the business, says he has been solicited by large mutual fund companies and small money management boutiques alike.

Still, pulling tenured wholesalers from valuable turf takes more than an offer--it takes bucks. "You have guys making anywhere from $100,000 to $2 million," says Tod Parrott, a wholesaler at Rockaway Partners in Rye, N.Y., whose clients include Montgomery Asset Management. "You're not going to pull them away with a name; territory is very important." Good territory--such as California--means more dollars, says Parrott.

In the last few months, two wholesalers have been snapped from Roger Engemann & Associates in Pasadena, Calif., one top wholesaler was picked from Phoenix/Duff & Phelps in Connecticut, and another was taken from Furman Selz in New York. All of those hired away were recruited by rival money management firms.

Some of the packages used to coax wholesalers away include a guaranteed up-front bonus, a higher guaranteed salary, higher trailing commissions and a bigger payout on assets. For example, whereas in the past a typical wholesaler's commission rate would have been 25 basis points, 15 basis points and 10 basis points over a three-year period, it is now 30, 20, 10, with a five-point trailer for the life of the account, sources say.

"I've never seen the business like this before," says Bill Turchyn, a veteran marketer and wholesaler who is a managing director at Furman Selz. "There are very few people who attract an enormous amount of assets, and these people are very sought after." He says the plethora of small boutique money management shops striving to expedite growth in a bull market also is contributing to the hiring in the wholesale area.

The chips on the table these days also include equity in some firms. Paul Black, a former wholesaler with Roger Engemann, left that firm for an equity position with WCM Investment in Lake Forest, Calif.

"It was a better opportunity, so I took it," says Black. "Some firms have tapped out--they've grown all they're going to. Here we have the opportunity to grow into something much bigger." WCM has $300 million of assets under management.

Observers say money management firms are waking up to the fact that wholesalers have unique relationships with brokers. And these firms seem willing to pay up for access.

"They really are starting to realize that our book of brokers is just as valuable, if not more, than a broker's book of clients," says Parrott.

Jack Sharry, executive vice president of retail at Phoenix Duff & Phelps in Hartford, Conn., says he has put in place a retention plan for his top wholesalers that includes a stock option plan, a restricted stock plan, profit sharing, a 401(k) plan and an employee stock purchase plan. "We also use these as a recruiting tool," says Sharry. "We want our top wholesalers to be owners of the company, too."

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