Editor's Note: Alex Samuelson, head of media relations at Smith Barney, says the number of reps leaving Smith Barney in the story below is inaccurate—that is to say, the number cited below is way too high. Samuelson wouldn't offer the lower, correct number, but acknowledged that, in fact, the broker attrition in the week ending Feb. 16 was larger than usual—indeed it was "anomalous" to the usual weekly FA attrition rate of around 10 percent (which is below the industry average of around 15 percent).
Registered Rep., for it's part, believes it acted in good faith and actually did, in fact, confirm the amount of advisors leaving when it spoke to a media relations executive last week. Smith Barney strenuously disagrees, saying there must have been a misunderstanding in the conversation.
By Kevin Burke
Sixty-nine brokers left Smith Barney Friday, Feb. 16, just ahead of the three-day weekend. Fridays before a long weekend are historically prime time for unhappy brokers to make a clean break, but the large number of brokers taking off on a single day is alarming, according to one recruiter.
“It’s an astonishingly high number,” says recruiter Rick Peterson, president of Houston-based Rick Peterson & Associates. “In high turnover years in the past, on a Friday before a long weekend you would see as many as 25 to 30 leave on a big day.” Smith Barney confirmed that 69 brokers were no longer with the firm as of last Friday, but declined to comment further on what are said to be “rumors.” (The company has since retracted its confirmation, and will say only that this number is wrong.)
Several firms benefited from the en masse departure, according to Peterson. UBS was the big winner, he says, getting more than 20 Smith Barney reps, while Morgan Stanley got 15 and Merrill Lynch took between 10 and 12 reps. Some disenchanted Smith Barney reps also went to independent platforms at Wachovia and Raymond James, Peterson says. Five reps left for Morgan Keegan in the South.
Peterson further states that the reason behind the high number of departures was the firm’s recent compensation changes. (See "More or Less?" for the firm’s December changes to payout, and check out this more recent story on additional changes to the compensation program made this month.)
Andy Tasnady, a compensation consultant in Port Washington, N.Y., speculates that the pay changes may have irritated brokers who were already disenchanted: “A comp change may have pushed people who were thinking of leaving anyway over the edge.” No matter what the reason, it’s not good for Smith Barney: “It’s very dangerous news,” he says, adding that if headhunters see a firm weakening, they’ll pounce. “Recruiters smell blood in the water.”
One broker laments on Registered Rep.’s message board that the news is not surprising. “Smith Barney definitely now has the most restrictive platform and one of the lowest payouts in the industry (particularly on wrap business) and the relative power of management has substantially increased,” says one broker who calls himself San Fran Broker.