Much can be learned by observing a firm’s recruiting practices.
Three years ago, when Morgan Stanley and UBS pulled out of the Protocol for Broker Recruiting, it signaled a shift from prioritizing recruiting competitive hires to a focus on organic growth and preventing attrition. However, in the past 12 months, Morgan and UBS have become quite active in recruiting once again—with Morgan making it clear they have their sights set on attracting the most productive advisor talent in the industry, bringing in eight billion-dollar-plus teams and over $14B in assets in the past year.
UBS and Merrill have made some even more interesting recruiting decisions during that same period: Three of Merrill's most significant hires were advisors from bank programs, and UBS has brought in five significant private banking teams—four since the beginning of 2021.
For firms that have traditionally focused almost exclusively on recruiting competitive advisor talent, and were historically “lukewarm” about private bankers and bank brokers, these are major developments. While these bank advisors may have built strong businesses elsewhere, they often can be less-desirable recruits because:
- Their books are less portable—“stickier” to the bank they come from because, in many cases, the relationships originated from internal referrals;
- Bank advisors are accustomed to working in a more-siloed construct where relationship management and investment management are divided among different team members—and this creates two potential issues:
- Unless the entire team is recruited, they’ll never capture all of the client relationships; and
- These bankers tend to be less self-sufficient because they rely heavily on the banks’ infrastructure for support.
- Private bankers often must abide by garden leave provisions in their employment contracts—so they’re riskier, more expensive hires because the prohibition to contact clients for a 30- to 90-day period is often detrimental to overall portability;
- Their assets almost always take longer to move than their wirehouse counterparts, typically moving only 12–25% of their assets over a two- to three-year period—because the client relationships are often more fractured among team members and less directly related to any individual advisor;
- Bank advisors, particularly private bankers, work in a salary-bonus construct—so the “eat what you kill” traditional brokerage comp model can be challenging to adapt to; and
- While they may have been mega-revenue-generating top teams in the banking world, private bankers will most often be valued as much smaller fish in the larger pond of the wirehouse world—because it’s likely that at least some of their client assets won’t move with them.
What Does This Activity Say About Where These Firms Are Headed?
So it begs the question why firms like UBS and Merrill, the latter, in particular, would be recruiting these teams to the exclusion of the more traditional, like-minded and essentially “more productive right-out-of-the-gate” advisors?
Are these hires anomalous happenstance, or is there a method to each firm’s madness? Are they, in fact, interested in shifting their focus from employing traditional advisors with the biggest books of business—and paying big money to do so? Or are they inching toward an interest in “private bank advisors”—morphing a sales force and their ideal candidate archetype? And are these further signs that they are moving closer to a salary-bonus model?
There are a few things we can hypothesize about UBS and Merrill judging by their recent recruiting activity:
- They want advisors that will leverage all aspects of the firm—especially banking and lending;
- They want advisors with stickier assets and who will be more captive for the long term—that is, advisors who will be less likely to change jerseys or jump ship when their deals are up;
- They like teams—because it’s harder for them to leave as a group than a single advisor; and
- It’s much less expensive to recruit a private banker—because the deals are almost always less upfront heavy and more weighted toward back-end growth bonuses.
With so much going on in the constantly evolving wirehouse recruiting landscape, it can be difficult to step back and take a bigger picture look at the signs and signals around you—but it’s critical to remain aware, particularly as an employee advisor whose future is guided by the firm you work for.
That said, it’s imperative to always check in with yourself and your goals—and likewise, stay current on the opportunities around you. Because while change happens over time, its impact can often feel instantaneous—particularly when you’re not expecting it.
Mindy Diamond is CEO of Diamond Consultants in Morristown, N.J., a nationally recognized boutique search and consulting firm in the financial services industry.