A five-member team of Merrill Lynch advisors based in New York, led by Harvey Kadden and boasting more than $1 billion in assets and $14 million in yearly fees and commissions, joined Morgan Stanley Smith Barney on Tuesday.
This development, says one recruiter, should send a strong warning to Bank of America-Merrill Lynch—either improve the relationship between the bank management and FAs or watch more wealth managers depart.
“This is sending a big message to Merrill Lynch,” which includes about 16,722 advisors, said Rick Peterson, head of Rick Peterson & Associates in Houston, in an interview with AdvisorOne. “Brokers get it. It’s amazing. My phone is ringing and ringing. This is huge.”
BofA-Merrill’s (BAC) head of wealth management, Sallie Krawcheck, was forced out of Bank of America-Merrill Lynch in early September as part of the bank’s reorganization, and this sudden move created bad feelings, observers say.
Historically, advisors “have always been wary about banks,” Peterson said, “because banks pay less and use a salary-and-bonus structure vs. straight [fees and] commissions. This is terrifying to advisors.”
But beyond these compensation concerns, there has also been a long-term cultural divide in broker-banker relations. “Advisors see them as bankers and feel that there is a big disconnect,” Peterson said. In the case of the team led by Kadden, this frustration culminated in the group’s departure.
Other recruiters agree. “This should be looked at as a definitive statement” about BofA-Merrill, said Howard Diamond, managing director of Diamond Consultants, who works for Morgan Stanley (MS) and other clients. “It’s created a tremendous ripple in our world as we talk to Merrill Lynch advisors, and they see a big high-power team has made the move.”
Kadden is joining MSSB’s midtown Manhattan branch with Mihir Patel, Randy Knopp, Tim Baker and Chris Barber. The team now reports to complex manager Ben Firestein, according to Morgan Stanley Smith Barney, which has about 17,290 FAs.
A member of Merrill’s elite Circle of Champions for the past decade, Kadden was with Merrill Lynch for 30 years. Patel was at Merrill for 10 years, working as advisor for six of those years and being selected as a member of the Circle of Champions for three years. Knopp spent 33 years at Merrill and was a member of the Circle of Champions for eight years.
“We are talking about lifers,” said Peterson, “some of Merrill’s most senior and largest producers … who feel that everything they work for is being undermined.”