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In Tough Year, Unearthing Opportunities For Branch Managers

As retail brokerage firms continue to make acquisitions and consolidate offices in 2011, still more branch managers may find themselves getting pink slipped, experts say. But other shifts in the wealth management business could spell opportunity for those managers who are able to reinvent themselves.

As retail brokerage firms continue to make acquisitions and consolidate offices in 2011, still more branch managers may find themselves getting pink slipped, experts say. But other shifts in the wealth management business could spell opportunity for those managers who are able to reinvent themselves.

Branch managers have experienced unprecedented difficulties over the last several years. From 2004-2009, wirehouses let nearly half of their branch managers go—roughly 2,000 out of about 4,500, says Rick Peterson, head of Houston-based industry recruiting firm Rick Peterson & Associates.

Bing Waldert, director of Boston-based Cerulli Associates, says even more jobs were lost in 2010. “The fact that UBS and Morgan Stanley Smith Barney (MSSB) continued moving toward the ‘complex’ model led to more widespread managerial layoffs, and forced many of them back into production.” While the movement began a couple of years ago, managers are still experiencing the fallout. “There are far fewer branch management jobs now than there were in 2009,” he says.

Chip Roame, Principal of Tiburon Strategic Advisors, a CA-based industry research and consulting firm says the number of branch manager jobs lost last year totaled between 100 and 200. “Complexing is a solid, profit-oriented move by wirehouses, which are under threat from the independent movements, and I applaud them for more cost-conscious efforts,” he says. “But, these lost jobs will never come back.”

What’s more, Waldert says, many of these managers don’t have a book of clients to fall back on. “And, there’s very stiff competition for alternative jobs in the industry—like wholesaling, etc.”

Roame says the merger of Morgan Stanley and Smith Barney was particularly hard for branch managers. “Bank of America/Merrill Lynch and Wells Fargo/Wachovia were really stand-alone acquisitions whereby the acquired firms remained pretty much intact. But, in creating MSSB, hundreds of offices overlapped, making many branch managers redundant. Much of this has been sorted out, but there is still more to come. And, I can easily see UBS and RBC buying more mid-size firms in 2011, which could lead to even more branch manager redundancies.”

One manager from the northeast who was recently let go by MSSB agrees. “Some of these folks will undoubtedly go into production. Others, like me, may look to the independent side. Unfortunately, some will have to leave the business entirely. Many branch managers are very skilled entrepreneurial business people. So, as they continue to be squeezed, hopefully, they’ll find places to use their talents in other areas of the workplace.”

On the upside, Waldert says there’s been increased demand from boutique firms for experienced branch managers, but only for a select few. “This has really been for the best of the best who could bring multiple advisors with them,” says Waldert—perhaps 10 percent to 20 percent of those branch managers with a very strong following. Roame agrees: “Even managers with strong followings have difficulty prying away financial advisors who have their own retention package issues and other options.”

Goldman Sachs’ recent announcement of intentions to expand its private client business may create demand for branch managers at the firm, Roame speculates. “I also think some of the semi-independent/hybrid models that have emerged—such as Chicago-based HighTower—(a national advisor-owned financial services company) and NY-based Dynasty Financial Partners—may ultimately require more infrastructure and hence branch managers. And, I’m sure LPL’s IPO [in November 2010] has made it a more attractive landing place for wirehouse reps who may have traditionally looked down upon the independents, which may again translate into a greater need for branch managers there, too.”

But, in order to remain a non-producing manager, Waldert says you have to bring “a lot of production with you to justify your compensation.”
There is also the option of starting one’s own IBD, he says. In a well-publicized move, former Houston UBS branch manager Patrick Mendenhall left his lucrative job in 2009 to start US Capital—a dually licensed full service wealth management firm in Houston. Since it opened its doors in September 2010, six of Mendenhall’s former UBS advisors have left to join him at US Capital, bringing $1 billion in client assets with them.

And, in 2008, after A.G. Edwards was acquired by Wachovia and subsequently became part of Wells Fargo, Benjamin F. "Tad" Edwards IV, the great-great-grandson of Edwards’ founder Albert Gallatin Edwards, resigned from A.G. Edwards to start his own full service brokerage firm, Benjamin F. Edwards & Co. Benjamin had been A.G. Edwards’ president in 2001 and then moved into branch management. He brought his [now] late father, Benjamin F. Edwards III, the legendary retired chairman and CEO of A.G. Edwards, with him.

When Wachovia acquired A.G. Edwards, Edwards IV says both he and his father—who retired in 2001, received “a tremendous outpouring of phone calls from advisors and others, urging us to carry on the Edwards legacy.”
Over the past two years, the new Edwards, which clears through Pershing, has opened 14 branch offices in eight states. Nearly every branch has its own manager, says Edwards, the firm’s chairman, CEO and president. The vast majority of them are producing managers.

The firm has hired dozens of A.G. Edwards’ alumni away from Wells Fargo Advisors “as well as reps from smaller, specialized firms—in keeping with our entrepreneurial culture committed to putting our clients’ interests first and treating others the way we want to be treated,” Edwards says. Edwards & Co. currently has 44 financial consultants and 134 employees.

The other big issue for branch managers in 2011 will be recruiting, Waldert says. So many advisors moved in 2009, and there were so many advisors on retention packages in 2010, that branch managers will have to work harder to find high-producing recruits in the future. “There are some intriguing boutique options emerging for good advisors,” he says. “The corollary to this is how to generate new hires to the industry—how that whole process will be reinvented.”

A revival of training programs could also result in some opportunities for branch managers, says Roame. “Some of the wires will ‘ramp up’ rep training programs, start building aggressively from within, and start hiring and training newbie brokers at a faster clip,” he says. “This may lead to oversized branches and branch manager opportunities.

”And, my guess is that at least one of the wires will acquire one of the larger IBDs. They would likely overlay a bit heavier on the branch management structure, again possibly creating some opportunities for branch managers.”
“As the industry restructures itself, there will be new opportunities for some branch managers,” Waldert says. “Mainly, for those willing and prepared to change with the industry’s changing landscape.”

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