At 10 a.m. John was fired. Within 15 minutes security ushered him out the door carrying his personal belongings in a box. At the nearest Starbucks, he contemplated what happened to his 27-year career as a wirehouse broker.
Sad as it may be, John's experience is pretty common lately. He was a $200,000 producer, and brokers in that range can't feel safe about their jobs at wirehouses. Morgan Stanley made headlines this past year cutting 1,000 representatives, or 10 percent of their brokerage force, because they were low producers with numbers just like John's.
Other big firms are sending low-producing brokers messages that they are no longer as wanted as they once were. At Smith Barney, for example, brokers with six to eight years at the firm need to knock down $250,000 in production, while those with nine and more have to beat $300,000. Otherwise, they face a 3 percent-to-5 percent payout cut.
Still, whether you may be going or gone, all need not be bleak. Brokers who see the handwriting on the wall, may have better options if they jump to another firm before being pushed.
A 25-year Midwestern UBS veteran with $300,000 in production, $13 million in assets under management and a book of almost all transactional business felt “nickled and dimed” by his firm's ticket charges. While his payout remains the same, the additional cost of doing business was strangling him and he was tired of the pressure.
He began looking for another job and, within three weeks, found one. As with many low wirehouse producers, he went with a small regional firm where he found the pressure lower and his payout higher.
Even John bounced back, though it took him longer. He landed at a small second-tier firm with less than 100 brokers nationwide after three months of searching. Many of his clients did not follow him because they had found other brokers to manage their money in the time he was not working. He received a total transition package of only 40 percent of his $200,000 production. Twenty-five percent of it was paid in cash upfront, with the balance to be paid after he brings over 80 percent of his pre-recruitment assets.
John might have done better had he left with more favorable wording on his Uniform Termination Notice for Securities Industry Registration (U5), which must be filed for anyone leaving a brokerage firm. John's U5 read “involuntary termination for low production.”
It is incumbent on the broker to talk with an attorney when they are terminated to get the best possible deal on their U5. The firm has 30-days to file, and while it is virtually impossible for a broker to get another job without the filing, he or she can use that time to get a lawyer to negotiate for them. For example, the words “permitted to resign” are far preferable to “terminated for failure to meet sales goals.” The words “voluntary resignation” are the most benign of all.
As for those 1,000 Morgan Stanley brokers, they couldn't manage anything so kind as a resignation, but they did better than John. Their U5's read “terminated due to reduction in force.” While it's impossible to say how all of them have done, the scuttlebutt in recruiting circles is that they were able to find jobs — albeit not with wirehouses. Simply put, small firms with less than 500 brokers are just not that demanding when it comes to production numbers and will often hire an advisor who produces only $200,000 — or less.
In sum, there are jobs out there for wirehouse brokers who have been pushed or have jumped because their production numbers were low. The quality of the firm and the amount of the transition package that these brokers will command has everything to do with their willingness to consider changing firms and leaving their wirehouse before they must.
Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting www.diamondrecruiter.com