Some Branch Managers Forced To Produce

In an effort to cut costs, some brokerage firms such as UBS and Morgan Stanley Smith Barney are restructuring their branch office organization and changing the rules about which managers must generate production. Consultants and recruiters are split over whether other firms will follow their lead, and whether requiring some branch managers to begin producing is even a good idea.

In an effort to cut costs, some brokerage firms such as UBS and Morgan Stanley Smith Barney are restructuring their branch office organization and changing the rules about which managers must generate production. Consultants and recruiters are split over whether other firms will follow their lead, and whether requiring some branch managers to begin producing is even a good idea.

UBS recently let go a series of “market area managers” who manage branch offices and, at the same time, required a number of BOMs to become producing mangers. Some advisors at the firm feel these branch managers will ultimately look to leave.

“We announced last spring that in July, we’d be consolidating our regions from eight down to three—the West Region, Central Region and the Northeast,” UBS spokesperson Kris Kagel says. “It is also accurate to say we reduced the number of markets—from over 40 down to about 18.” Within those 18 markets, UBS has roughly 64 branch complexes as well as a few stand-alone branches and private wealth management offices, Kagel says. The complexes were created based on a number of factors including location and operating efficiencies. Complex mangers—and managers of stand-alone branches—will not be producing, he says. But many others will.
”Our focus is on streamlining our business and driving more decision-making deeper in the organization—and closer to the client,” Kagel explains. “Creating structural changes and relationships between branches to form complexes will allow UBS to do this most effectively. “We are looking for other opportunities within UBS for the impacted market area managers,” he says. This new structure will not be implemented until the fourth quarter of this year. For now, whether UBS branch managers who are forced back into production will try and go elsewhere remains to be seen.

Meanwhile, Morgan Stanley Smith Barney is in the process of adopting a new branch complex structure. All complex managers will be non-producing, while managers reporting to them will be both producing and non-producing, based on office size and growth potential, the firm says. Company spokesperson Christine Pollak declined to give any further specifics.

But Wells Fargo Advisors does not have any plans to rearrange its branch office structure, nor to push additional branch managers into production. “We have both producing and non-producing managers,” says company spokesperson Anthony Mattera. “And while, in the larger markets and complexes, they are predominantly non-producing, we can accommodate both and have no program to encourage non-producers to become producers,” he said. At press time, Merrill Lynch had not replied to inquiries about potential plans for branch office restructuring.

Good, Bad or Ugly?

“I don't think that making non-producing managers into producing managers is going to become a full-fledged wirehouse trend,” says Howard S. Diamond, managing director and chief operating officer of Chester, NJ-based Diamond Consultants, and industry consulting and recruiting firm. Diamond thinks that it may be a short-sighted effort to try and save money and that it creates an inherent conflict between them and their advisors. “A manager’s job is to mentor advisors, run interference for them, deal with upper management, etc. If he’s being compensated more to produce, how much motivation is he going to have to manage, and how available will he be to his FAs?”

Further, he notes, many non-producing managers were formerly producers who got out of it because they weren't very good at it, they were burned out, or they just didn't like it. “How successful will these managers now be if they were forced back into production?” he asks. “Not very, I would think.” Diamond thinks that many non-producing managers who are involuntarily forced back into production will think about leaving their firms, even if job opportunities are scarce for them right now. “Many firms are letting non-producing managers go; especially when there is duplication in a territory or city. Unfortunately, I think we will see a situation where some managers will be forced back into production—and they’re simply going to be less effective as managers.”


Chip Roame, managing principal of Tiburon Strategic Advisors, disagrees. “I think the need for cost containment at UBS is the same for the other firms so, to that degree, I think many wirehouses will have to streamline their businesses.” says Roame. “However, UBS has a much more imminent need to show centralized command and control during times of stress like they’re currently experiencing. So, I think they’ll go much farther and faster in doing so.”
UBS settled with the U.S. government over tax evasion charges in August, but its reputation is still suffering as is morale at the firm, according to financial advisors.

Nevertheless, Roame says that, in some instances, having formerly non-producing branch managers produce makes perfect sense. “In large markets, you will still have true full-time
managers,” he says. “In smaller markets, this can’t always be justified. It’s simply an economic reality. One way of controlling costs and taking more of a ‘centralized command-and- control’ stance is to narrow management lines. I commend what UBS is doing,” he says.

That said, he expects firms won’t force highly successful branch office managers to produce.
A BOM at MSSB in the Northeast, who asked not to be identified, agrees with Roame that the wirehouse firms are not going to want to rattle their most successful branch managers. “If these firms feel they have to streamline management to save money, their top guys are going to be even more critical of them and likely not forced into production,” he says. As for smaller branch managers, he said, “we’ll have to wait and see. Some smaller branch managers already produce. By keeping a small book of good clients, BOMs can move back into production more easily if they lose—or want to leave—their jobs.”

Will those forced into production head for the door? “I doubt it,” Roame says. “Where would they go? Some may go independent and try to set up shops for to their brokers to follow them to. But, I think most of them view this as their career choice they’ve made and will see things through.” On the other hand, RIA firms seem to be snatching them up lately.


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