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April 25, 2012 at 08:00 PM
The movement of financial advisors out of the wirehouses has continued in early 2012, experts say, and should put Merrill Lynch and Morgan Stanley on notice. At the same time, though, the majority of advisors who decide to make a move remain with the wirehouses or other large national firms, they add.
A former Morgan Stanley Smith Barney team, for instance, just moved to LPL Financial in a hybrid-RIA model. The three San Diego-based advisors, Neil McNeil, Robert Meyer and Ryan Clive-Smith, have about $2 million in yearly fees and commissions and some $300 million in assets.
The group is now operating as Ibis Capital and is partnering with Stratos Wealth Partners, an RIA. Stratos has over $2 billion custodied with LPL Financial, representing the vast majority of the RIA’s assets. Ibis Capital also has chosen Fidelity Institutional as its custodian.
“An LPL-Fidelity combination is very unique. LPL has traditionally not allowed such arrangements,” said Chip Roame, managing director of Tiburon Strategic Advisors, in an interview.
A spokesman for LPL, however, says that the Ibis arrangement is not very unusual: “LPL Financial, like all custodians, does business in a multi-custody marketplace. Furthermore, because of the integration benefits our RIA platform offers, our RIA customers typically custody all of their assets with us, but it is not unusual for larger RIA firms such as Stratos to retain some residual assets with other custody firms while utilizing LPL as its primary custodian.”
Earlier this month, a Merrill Lynch private-banking team with about $1.4 billion in assets joined the independent advisor-owned HighTower in New York. This is the fourth “breakaway” team to move from Merrill to HighTower, a registered investment advisory firm.
The issue, says Roame, is more about the importance of “trailblazers” and the broader breakaway-broker trend and less about the specifics. If some have already embraced independence, the question becomes “will many more follow?” asked the consultant. “I tend to think that if Merrill does not respond with better offers, this trend will accelerate.”
Merrill is taking some steps to make up for departing reps. In February, it introduced more substantial recruiting packages to advisors with rival firms; some may now receive as much as two times their previous year’s fees and commissions in cash after 12 months.
The team of Jose Fernandez and Juan Aleman recently joined Merrill’s San Diego office from Citibank with about $2 million in yearly sales and $260 million in assets. And the duo of Ryan Baker and Stuart Hamm came to Merrill from Morgan Stanley in Florence, Ala., with plans to move over nearly $1.4 million in yearly production and more than $130 billion in assets.
For its part, Morgan Stanley maintains that advisor attrition, particularly in the top two quintiles, “remains near historical lows.” In mid-April, just ahead of issuing its first-quarter earnings, Morgan Stanley said it recruited four UBS advisors and two Deutsche Bank FAs. The combined assets of the three teams are about $1.4 billion, while the total yearly fees and commissions are close to $8.7 million.
