Coaching in a Storm

It takes a special mix of talents to manage a team of brokers in the current business environment.

Once upon a time, being branch manager was a pretty good gig. The biggest producer in the office was often given that title, along with a nice override on his team's production and a direct line to the home office. Sure there were headaches — developing talent, recruiting established producers and mediating the occasional client/broker (or broker/broker) conflicts. But overall, life was good.

But that was then.

In recent years the management portion of the job has blossomed into a full-time affair, thanks to industry consolidation, increased regulatory scrutiny, customer disenchantment and a host of other concurrent forces. Managers able to find time to produce get attitude from brokers who resent the added competition; managers who don't produce are sometimes resented, considered parasites living off the hard work of their employees.

Perhaps worst of all, the connection between branch managers and the home office — once a source of motivation, support and direction — is strained. Branches are treated as autonomous profit centers, but yet must toe the national party line.

“There is a disconnect between the ivory tower of headquarters and the branches,” says one veteran wirehouse branch manager. “I am not sure the brass knows what's going on down here. I know they have pressures, but some empathy would be good. Lip service doesn't cut it.”

One long-time industry consultant calls it “the most challenging job on the Street.” He says, “The firm piles up their plates with expectations about changing to fees, and then says, ‘Oh, what's your [branch's] production?’ I'm seeing a lot of frustrated managers.”

Another branch manager sums it up this way: “A lot of times you feel like a piece of bologna. Stuck between two pieces of bread,” with the home office pressuring from the top and the branch's reps pushing from below.

Topping it off, there's the bear market, which has exacerbated tensions, since a branch manager's pay is mostly dependent upon the branch's profitability. And with the growing volume of compliance issues, branch managers are in a particularly tough spot: expected to inspire the troops while at the same time policing their every activity.

Therefore, a manager is easy to spot these days, says Michael Brown, founder and president of B/D Solutions, an Atlanta-based consulting company. “He's the guy with a target on his back and a big S on his chest.”

If that's true, says one branch manager, there's an awful lot of kryptonite floating around: “The next branch manager's retirement party I go to will be the first. There are that many ways to get taken out.” For this reason, some wouldn't dream of taking such a role. But there are those who relish such a challenge — particularly when the financial rewards for success are so great.

We spoke to dozens of the best branch office managers, from managers of tiny regional shops to lords of sprawling city offices. Their secret to success doesn't sound all that tough: work hard and pay attention to details. But, as we all know, that's not nearly as simple as it sounds.

It's hard to quantify the ghost in the manager's machine, because different firms, locations, situations have different needs. But there are certainly attributes that the best share. These include putting management responsibilities first (whether they produce or not) and — the hard part — knowing exactly what everyone is doing all the time, being willing to help within the rules.

Compliance and Coaching

Observers and branch managers alike say firms are expecting managers to wear more, perhaps too many, hats. The problem is compliance. Many are finding it too time consuming to read a stream of email flagged by policing software meant to flag potential fouls and still recruit, train and motivate. The pressure can be excruciating.

Complaints filed with the NASD for “failure to supervise” rose 34 percent in 2002 to a record 2,633. “I need to drive revenue, but I don't have the time,” says one manager. “I need to hold brokers' hands, but I have to act like a cop. I need to recruit, but no one's moving.”

In fact, regulatory oversight is on the cusp of becoming “the number one job of branch managers today,” says Brown, the industry consultant. “You can attack the task from a number of different angles, but you have to make it your priority.”

Tibby DeJulio takes this advice to heart. For 13 years, he has managed the Sandy Springs, Ga.-office of A.G. Edwards, which he founded and built into a regional powerhouse. Today, he oversees 16 registered reps who manage more than $300 million worth of accounts.

What's changed in the last decade-plus, he says, is the amount of time he spends policing email. He spends hours each day auditing emails selected randomly by computer. Primarily he's looking for regulatory red flags. The software trolls the e-mail database for messages with certain keywords, like “guarantee” or “illegal,” the idea being these words might be part of illicit conversations.

In addition to his email work, DeJulio spot-checks accounts. The detective work yields results. In one review, DeJulio discovered a customer had been lending money to the broker. The transgression led to the broker's dismissal.

For many, such activities are hard to sustain — particularly when you're expected to spend time developing younger brokers. But there are ways to combine two or three tasks into one, says Jeff Bourchard, manager of Wachovia's Woodland Hills, Calif., complex. He practices “management by walking around,” which sounds less effective than it is. With 50 brokers under his tutelage, he finds the possibility for random queries about practices an effective management tool. “You have to hold the largest producer accountable for their smallest actions,” he says. For younger producers, he says, “I ask, ‘How many people have you talked to today? How many did you call last week? How much in new assets do you have in your pipeline in the next 90 days?” In so doing, he encourages more productivity while also staying abreast of their everyday actions.

To Produce Or Not To Produce

Brokers' feelings about managers who produce are best summed up by this statement from a Morgan Stanley broker: “A producing branch manager who is a broker, he is your competitor.” Yet the reality is that many firms are likely to add, rather than subtract, producing managers in the coming years, and this is particularly true in smaller satellite offices. At Merrill Lynch, for instance, managers can produce and run “associate offices,” which generally average about 15 producers. Morgan Stanley meanwhile has consolidated offices into complexes, complete with a producing manager. Prudential (which recently announced a long-expected merger with Wachovia Securities) has done a bit of this as well.

Being a player/coach presents plenty of problems, not the least of which is the engendering resentment in the other players. Reps often complain that branch managers end up taking the best accounts of departing reps — a contention branch managers acknowledge as a potential problem. Which is why some find ways around the problem. One manager's answer? “I distribute all the accounts,” he says. Problem accounts — those with client complaints — he generally takes on himself. This gives him a way to boost his production while deflecting charges of opportunism.

Pat Powell, manager of Robert W. Baird's Racine, Wis., office, takes a draconian approach. “I exclude myself unless a client asks for me,” he says. “I have to act equitably, particularly as I'm trying to develop other producers.”

Padding your own book, or paying too much attention to it, could have consequences beyond the hurt feeling of producers. “If you've got a compliance issue with a broker and you get dragged into court as the manager, it's hard to convince the panel he spent his time supervising,” says one former Wachovia branch manager. “The opposing lawyer is going to say, ‘You've got a million-dollar book. How could you be supervising your 80 brokers?’”

Some branch office managers decide to dedicate all their time to management duties. Dennis Drescher, who runs Prudential Securities' main office in Chicago, thinks that it wouldn't be fair for him to run his own accounts. “With 60 people to oversee, I have to concentrate on being a manager first,” he says.

But that doesn't necessarily mean being a producer and a manager is automatically a recipe for trouble. For some, it's a reminder of how life is for branch reps. Of course, many small offices can't support a full-time manager, and tend to ask the manager to do double duty. But for some big-branch managers, deciding to produce is a badge of honor. “It's a credibility issue with the reps,” says Bill Sullivan, a Santa Rosa, Calif.-based office manager. “I do it to set the pace and show that I understand the process.”

“Staying active as a producer keeps me abreast of the business and keeps my thinking fresh,” adds DeJulio, who manages about $85 million in assets himself.

Ultimately, what's driving these decisions for some is economics. “Philosophically, I agree that there's a conflict of interest,” says a Morgan branch manager. “At the same time, you have to have a producing manager to have satellites.”

Creating Michael Jordan

Tellingly a number of managers interviewed happened to have played sports in college. Even those without such specific experience referred frequently to aspiring to the coaching model of management — a style in which the success of the team equals personal success.

“There is something that I have inside me that my ego satisfaction is fed by seeing other people succeed, and not just my own success,” says Joe Touchton, manager of Hilliard Lyons' Terre Haute, Ind.-branch.

Many say the key to developing producers is recognizing their individual motivations — rather than simply managing by decree. Quite a few say they've spent time encouraging the development of producer teams within their offices, or getting them to be more productive with the clients they pursue. “I try to get people involved with local business owners so they can see money in motion,” says Powell. “I want them focused on people that are good prospects instead of just names.”

Many branch managers interviewed say their contact with clients remains frequent and strong. “I still get as much contact with the customers as I did when I was producing directly,” says Prudential's Drescher. Others function as the heavy artillery, coming into the process when it's time to nail down a huge account, or calling in experts to handle particularly complex accounts.

DeJulio stresses training as his most important role. For the new initiates, he directly oversees their training classes. He meets with new brokers every Monday at the end of the trading day and leads a class. Drescher arranges for visiting wholesalers and fund representatives to teach a class or run a Q&A session.

Some managers say the hardest part of the coaching process is helping brokers migrate from transaction- to fee-based strategies. Many say their firms mandate such a migration without giving enough support. “Telling isn't coaching,” says one.

Jodi Rolland, manager of Merrill Lynch's Denver complex puts it more specifically: “I tell all my financial advisors, ‘Every Michael Jordan needs his Phil Jackson.’”

“I'm Phil Jackson,” she says.

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