Fewer Wirehouse brokers are jumping ship, executives say

January 21, 2022

According to executives from Merrill Lynch, Morgan Stanley and Wells Fargo, last week a long-standing trend of attrition of experienced brokers from distribution houses is abating.

For the second consecutive quarter, Merrill Lynch’s annualized attrition rate fell to 3.1%, below the historical average of 4%, a senior executive said Wednesday. It was also below a high rate of 5% in the second trimester. The comments echoed Bank of America chief executive Brian Moynihan, who told analysts on Wednesday that attrition at the level of the broader division of wealth was stabilizing.

Similarly, Morgan Stanley CEO James Gorman noted Last year, his company achieved the unusual feat of positive net recruiting as more brokers joined the competition than left. “Competitive attrition” had fallen to around 2% from 4% six years ago, the company said during a presentation last summer.

“We were significant net gainers,” Gorman told analysts. “It’s not because we do stupid recruiting contracts. It’s because we don’t lose a lot of people.

At Wells Fargo & Co., which has suffered near double-digit headcount declines every year since its parent company’s fake account scandal in 2016, a spokeswoman said attrition had slowedand the company reported that the rate of departures fell in the fourth quarter below that of the previous year.

At least one official tally of industry-wide moves, the Financial Industry Regulatory Authority’s Annual Industry Snapshot, has yet to be released, but executives’ commentary contrasts with recruiters’ descriptions. of a hiring spree over the past year. Anecdotally, an unprecedented number of brokers moved last year as transactions faded and more brokers found it easier to switch firms during the Covid-19 pandemic when they weren’t coming. not in the office, they said.

“You have registered new repositories for [Registered Investment Advisors], with all major independent brokers reporting headcount growth and anecdotal recruiters claiming a banner year, and the two major wiring agencies claiming they have no departures,” said Phil Waxelbaum, an industry recruiter in Los Angeles. . “Where are these people from? That does not make sense.

wholesale wirehouses obscured the ability to hold accounts on their main sales force. Morgan Stanley, which last had about 16,000 brokers, removed the workforce from its earnings reports last year, while Bank of America has for several years combined its Merrill strength with thousands of private bankers and Merrill Edge advisors based in consumer banks. Wells also began incorporating hundreds of bank advisers into its tally a year ago.

The Wirehouse channel had more than 44,000 advisers, or 15.2% of the total adviser workforce at the end of 2020, but that number had declined on a compounded annual basis since 2015 by 1.2%, while the rest of the sector fell on average by just . 2%, according to the most recent data from Cerulli Associates.

“When do you want to stop reporting a stat?” Waxelbaum said. “When you don’t look good.”

There’s also no clear standard for understanding how they calculate attrition or who they include in their denominator for “experienced” brokers, said Waxelbaum, who has placed advisers in both connection houses. and at independent brokers.

By ending or reducing headcount reporting, cabling powerhouse executives said profit growth was no longer dependent on headcount as much as they sought to extract more assets and productivity from their sales force. existing. Merrill executives also said the overall figure was more representative of Bank of America’s “one-company” vision of wealth management.

Companies have also all made efforts to curb attrition, including a eight week campaign at Merrill aimed at reducing certain red tape and a Softer compensation plan for 2022 at Wells Fargo. Morgan Stanley brokers have also benefited in some cases from a rise in share price.

But teams of advisors who walk away from connection houses continue to have a negative impact because they leave with large chunks of assets, recruiters said.

“We certainly see them still losing a lot of advisors,” said Louis Diamond, a New Jersey-based recruiter. “But forget the number of councilors who left; it’s more a matter of size and caliber.

Diamond said he’s stopped paying attention to broker headcount reported by hookups because it’s not clear who they count, and a company “can easily hire interns and put people in branches. banking without a book of business and call it the same thing after losing a team of $2 billion,” he said.

Seasonally, the fourth quarter is also typically slower for broker moves given the holidays, which can help promote slowing attrition, recruiters noted.

Other recruiters gave more credence to the remarks of wirehouse leaders. The number of departures is probably relatively lower than in previous years, but it should be noted that attrition has increased in other ways, including retirements and layoffs, according to Danny Sarch, a recruiter based in White Plains, New York.

“More advisors are retiring, the biggest source of overall attrition,” Sarch said. “Additionally, in the current regulatory environment, I’m sure more advisors are also being fired over compliance and personnel issues.”

Advisor attrition may have eased a bit recently at distribution centers, but it remains high, a trend initially sparked by isolated brokers in their home offices during pandemic shutdowns contemplating life changes, Rick said. Rummage, a Reston, Va.-based recruiter who also said he moved a record number of brokers in 2021.

Rummage was Wells’ No. 2 recruiter with 15 company hires, precedent shows Wells email thanking its external recruiters for successfully referring 101 brokers last year.

The fourth so-called wirehouse, UBS Wealth Management USA, which with around 6,000 brokers is less than half the size of its peers, has yet to report its year-end results.

-Mason Braswell contributed to this story.