Many of the discussions currently taking place among wirehouse advisors are focusing on the notion that while they are not completely satisfied with their firms, they don't believe that another wirehouse would be any different. These advisors may decide to stay put and focus on calming their clients about market volatility and negative press. But for others, including those not ready to go independent, the answer lies in the regional firms, a best-of-both-worlds solution.
Because this is an industry where scale matters, many well-respected regional firms such as A.G. Edwards, Piper Jaffray, Advest, and Legg Mason (to name a few), have been gobbled up by banks and behemoth firms. Those regional firms that have survived are strong, well-capitalized, and looking to grow. To be sure, because of the increasing uncertainty surrounding big firms like Merrill Lynch and UBS, and the longing by many advisors to return to those “good old days” where culture was something nurtured and prized by management and advisors alike, regional firms are now being explored as an alternative at an ever-increasing clip.
Similarities between wirehouses and regionals include a plug-and-play environment where the advisor is an employee, sitting among his peers with all of his needs handled in terms of client support, technology, compliance, etc. It's the differences in the two models that are often what tips the scales in favor of the regionals. Regional firms have somewhat less name recognition (which in the eyes of some is no longer a bad thing), many fewer layers of management, and thus less bureaucracy to navigate, far less headline risk, and close-knit and flexible culture.
Top regional firms like RBC, Oppenheimer, Robert W. Baird, Janney Montgomery Scott, Raymond James, and Stifel Nicholas have a lot to offer advisors for whom firm culture is the top concern. These firms believe culture consists of both visible aspects of a firm such as structures and processes, and invisible aspects such as espoused beliefs, values, strategies, goals, philosophies, perceptions, thoughts and feelings within the firm. Given this description, it's easy to understand how a firm's culture plays a critical role in the decision-making process when advisors are considering making a move.
A textbook example of those who best fit a regional firm environment can be found in the Mid-West wirehouse team of “John” and “Steven”; a team producing nearly $3 million in revenue on over $350 million in assets under management. John started his career nearly 30 years ago with Advest. Over the course of time, John's beloved firm was acquired by Merrill Lynch, which itself was bought by Bank of America. With his business growing (he added his junior partner Steven five years ago), John was comfortable in his physical surroundings even though he was working for a firm not of his choosing. He was not happy, however, about the increasing heavy-handedness of the bank. The culture was changing and John, like many Merrill advisors, felt angry about the constant management changes and the direction the bank was taking the Merrill Lynch unit. He and Steven knew that staying with the firm would not be right for themselves and their clients since they were now working for a behemoth bank, a far cry from the Advest John once loved.
Recently, John and Steven agreed the time had come to explore options outside the wirehouse world. Given that John is five years from retirement, he was loathe to sign a long-term note, but wanted to be “made whole” in a move so that he could repay the outstanding portion of his retention package. Most of all, they both wanted to be able to serve their clients with greater freedom and join a firm of like-minded advisors who value a supportive and client-centric culture.
So, John and Steven explored the regional firms. They were satisfied with the range of deals they were receiving from the firms they spoke with, even though the top deal was 200 percent of their T-12 with up to 80 percent paid in cash on a seven-year note. It was enough money to get the team out of the remaining retention monies that they owed to Merrill Lynch (around $1.7 million).
They selected Raymond James (not the firm offering the biggest deal) and were offered flexibility in terms of the length of the deal, and were able to negotiate a five-year contract so that John could exit when he wished and Steven could take over the business. Most important, they felt comfortable knowing they were going back to the culture that they missed.
Mindy Diamond is president of Diamond Consultants, of Chester, N.J., which specializes in retail brokerage and banking recruiting. www.diamondrecruiter.com.