Adviser departures slow at top brokerages in 2013


Following a year of heavyweight adviser departures at the biggest U.S. brokerage firms, a smaller number of top teams have bolted in 2013.

The decline, with moves by financial advisers down by roughly a third in the first half of this year compared with the same period last year, is good news for the firms, which typically lose large revenue streams because departing advisers take their clients with them.

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All told, about 200 teams of veteran advisers moved through the end of June, down from about 300 during the same period last year, based on Reuters data, which tallies the moves of adviser teams that manage around $100 million or more in client assets.

Advisers who moved in the first half of this year managed $40.2 billion in client assets, compared with the $59 billion in client assets managed by advisers who moved in the same period last year.

"So far the big firms have done a good job stabilizing their advisers," said Alois Pirker, a research director at the Boston-based Aite Group, noting the lower level of departures from the largest U.S. brokerages.

Greg Fleming, the chief of Morgan Stanley Wealth Management, noted a decline in attrition among Morgan Stanley advisers across the firm when he spoke at the Reuters Global Wealth Management Summit in June, and he and other top U.S. brokerage chiefs pointed to stronger markets as a factor in the trend.

Strong markets make advisers less likely to leave because the performance of client accounts typically tracks strong markets. The S&P 500 benchmark index was up roughly 15 percent year-to-date through Monday.

Recruiters and industry lawyers said because of the volume of big team departures in 2012, when at least 16 teams that each managed $1 billion or more in assets made a move, the overall pool of top teams looking to switch firms has shrunk, which has translated into fewer moves this year.

Advisers often try to gauge the likelihood of their clients moving with them when they decide whether to take the leap. "The biggest issue financial advisers have is if they leave, will the book transfer with them?" said New Jersey-based securities lawyer Tom Lewis of Stark & Stark.


Morgan Stanley Wealth Management, the largest U.S. brokerage, accounted for the most departures during the first half of the year among the top four firms, which often battle for the same pool of veteran advisers.

At least 62 adviser teams that managed $17.4 billion in client assets have left Morgan Stanley since January 1. That compares to 24 teams that managed $6.4 billion at Bank of America Corp's Merrill Lynch, 36 teams that managed $4.6 billion at Wells Fargo & Co's U.S. brokerage, and 18 teams that managed $3.3 billion at UBS AG's Wealth Management Americas.

"Teams," as tracked by Reuters, typically consist of one or two veteran advisers who move with their client assistants and staff members.

Numbers at the top two U.S. brokerages are down from 2012, when at least 79 teams that managed $18.2 billion in client assets left Morgan Stanley and 58 teams that managed $21.3 billion left Merrill.

Morgan Stanley said departures from its top two quintiles of advisers, those with the highest production, "continues at very low levels" and is running below 2012 levels.

Among the firms that were on the receiving end of those departures in the first half of the year: UBS, which landed a team managing $1 billion in client assets from Morgan Stanley in New Jersey; Stifel Nicolaus & Co, which hired a team managing $1 billion in client assets from Wells Fargo in Washington State; and Merrill, which brought over a team managing $1.1 billion in client assets from Morgan Stanley in Texas.


The overall stagnation in movement across the industry may be good for Wall Street companies like Morgan Stanley that own the largest U.S. brokerages and rely on keeping top advisers in place.

A Cerulli Associates report from last fall predicted the market share of the four largest firms would decline to 34.2 percent by the end of 2014. That's a projected drop of roughly 7 percentage points from the end of 2011, as adviser teams depart.

"Advisers don't want to see their firm in the paper," said Raymond James Financial Inc's chief executive, Paul Reilly, who noted that some of the negative headlines surrounding the parent banks of the top brokerages contributed to the recent departure of advisers from those firms.

Reilly estimated that more than half of the advisers who join Raymond James, a smaller firm based in St. Petersburg, Florida, come from one of the top four brokerage firms.

Brokerages can take a hit whenever a big team departs because it's difficult to replace client assets when an adviser leaves. The larger the pool of assets, the more revenue generated, resulting in a bigger loss to a firm when a veteran adviser departs.

For many Wall Street companies, their wealth management units are strong revenue drivers.

Morgan Stanley's wealth business, for example, contributed roughly 41 percent of the company's total revenue during the first quarter. An adviser who manages $100 million in client assets typically generates annual revenue of $1 million.

The slowdown in adviser departures so far this year has kept many of those assets in place.

"Numbers are pretty much down across the board," Ron Edde, a California-based financial services recruiter, said, though he warned the trend might change in the second half of the year if markets stabilize and advisers see a need to switch firms. "We may see a strong second half."

(Reporting by Ashley Lau; Editing by Lauren Young and Leslie Adler)