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Branch Mangers—Produce and Protect Yourselves

Two decades ago, producing branch office managers were pretty typical in the financial advisory industry. But mounting compliance issues made it very difficult for BoMs to do their jobs and hold on to a book of clients. Now, the clock seems to be rolling back to that earlier time.

Two decades ago, producing branch office managers were pretty typical in the financial advisory industry. But mounting compliance issues made it very difficult for BoMs to do their jobs and hold on to a book of clients. Now, the clock seems to be rolling back to that earlier time.

Recent bank and b/d mergers coupled with aggressive cost-cutting efforts have led many firms to consolidate branches, leaving more than a few managers out of work, says Rick Peterson, head of recruiting firm Rick Peterson & Associates. In fact, over the last five years, wirehouses have let nearly half of their branch managers go, or roughly 2,000 out of about 4,500, he says.

What’s more, firms such as UBS and Morgan Stanley Smith Barney are changing the rules about which managers must generate production, Peterson says, to further cut costs. “Hundreds of managers at both firms are being forced back into production. Their pay has been cut by at least 30 to 60 percent. The only way they can make any money is to build a book." Indeed, for many branch managers, having their own clients is the only way to survive.

Just ask Pat Mendenhall, a 27-year industry veteran who spent 19 years at the top of the wirehouse branch management game. In 1990, he became a producing sales manager for then PaineWebber in the downtown Houston area. By 1994, the firm gave him his own downtown branch — with 35 reps and $6 million in production to manage. In 1997, he combined the firm's two downtown Houston branches, and revenues soared to $30 million. Two years later, the complex had a rep force of 120 and total revenues exceeding $65 million, making it one of firm's top 3, and number one in Texas.

Despite such enviable success, hefty seven-figure earnings, and the fact that compensation on his book of clients had been capped years earlier, Mendenhall never gave up that book of clients like so many other branch managers did. He enlisted partners to help manage the $400 million-plus in assets he'd developed throughout his career, and oversaw an additional $100 million himself from 12 client relationships. “To me, production is any branch manager's first line of defense. If your compensation is capped, get partners to help you. All of the revenues go to your branch's bottom line. Establish succession plans, should anyone decide to leave.”

Like many of his peers, he grew increasingly frustrated with the changing role of the branch office manager over the years. But, he was able to prudently invest his earnings from his own client accounts, building up substantial savings. And so, in August, 2009, he stepped down. While the 50-year-old can afford to retire, he's far from ready to do so. “I'm taking my time to study the market, speak to advisors about what they'd like to see, and weigh my career options.”

His advice to other managers: “Keep producing and practicing what you preach. First, it allows you to better understand your FA's needs and client needs,” he says, as well as keeping your client service skills and product and investment knowledge up to speed. “I'm a big believer in leading by example, and the best way to lead producers is to be one of them and be darn good at it.”

Secondly, and even more importantly, he says, “If you run your own business and invest your personal earnings wisely, you can protect yourself from your firm and control your own destiny.”
Once you enter branch management, your career unfortunately depends upon more than just performance, he says. Office politics play a much greater role in your success. If you have a book of clients, you have more choices and more control, he says.

None of this is news to DJ Totland, who heads The Totland Group and is branch director of RBC Wealth Management’s Shrewsbury, NJ office, where he oversees 19 financial advisors.

A 20-year industry veteran, this former Smith Barney rep was promoted to producing sales manager in 2000. But, in that role, he says, he found it was difficult to serve his clients the way he wanted to. In 2007, Totland got an offer from RBC to for a producing branch director position, and he quickly accepted. He brought with him $60 million in assets from 150 household accounts and has reeled in another $15 million since the move.

“Producers always have a job,” Totland says. “Once you become a manager, unless you can keep your book, you become ‘overhead’. Plus, this business changes so rapidly that staying in production really keeps you on top of everything.” Though producing branch managers are sometimes seen as competition by the reps they manage, but Totland says he’s never felt that way, for several reasons. “We have a ‘broker of the day’ system where, each day, a different rep is assigned to work with any new prospects. I’m not on that list at all,” Totland say. “And, I don’t take any syndicate business, either. It’s all pretty logical.”

“If I could tell every stand-alone branch manager at every firm in the U.S. one thing, it would be keep — or build — a book,” Peterson concurs. It's your best recourse in this changing industry; your best protection against your firm. If you can get management compensation while you build a book, that's great. Time management can be challenging. But, in the end, good producers are never fired.”

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