ON THE MOVE-Top Morgan Stanley broker joins JPMorgan
A top Morgan Stanley broker, who managed about $2 billion in client assets, has left for J.P. Morgan Securities, marking one of the biggest departures this year from Morgan Stanley Wealth Management.
Jonathan Madrigano, a director of wealth management and a private wealth adviser at Morgan Stanley Private Wealth Management, the company's ultra-high-net-worth group catering to clients with at least $20 million in assets, generated annual revenue of between $8 million and $10 million, according to sources with knowledge of the move.
"That level of production is eye-opening," because only a handful of broker teams with more than $1 billion in assets under management leave any big brokerage each year, said Danny Sarch, a New York-based financial services recruiter. "There aren't that many guys out there of that size at any firm across the country."
Regulatory filings show Madrigano has been registered with J.P. Morgan Securities since September 28. A JPMorgan spokesman confirmed the new hire on Monday. Morgan Stanley Wealth Management did not immediately return a request for comment.
The departure of Madrigano, whose client assets of $2 billion were listed in a 2011 Barron's ranking of top financial advisers in New York, is the latest in a series of financial advisers to have left the unit, formerly known as Morgan Stanley Smith Barney. Morgan Stanley agreed to buy Smith Barney from Citigroup Inc in phases, starting in 2009.
At least 178 veteran advisers who managed more than $24 billion in client assets have left the firm so far this year, based on moves tracked by Reuters.
Reuters tracks the movement of individual advisers or teams that manage around $100 million or more in client assets, which typically translates to around $1 million or more in annual revenue production.
Widespread technology issues after the July completion of the merger of the groups to one platform have led to more brokers considering a move, according to interviews with recently departed Morgan Stanley brokers, current employees at the firm and industry consultants.
Some former Morgan Stanley brokers also blamed a difference in cultures of the two firms for these departures.
"There's definitely a culture clash between what Morgan Stanley is and what Smith Barney was," one Morgan Stanley broker who left the firm last week told Reuters.
While the loss of client assets managed by defecting advisers is only a small fraction of the roughly $1.7 trillion total under management at Morgan Stanley, industry experts say the departure of veteran advisers like Madrigano can hurt business.
There are also additional costs with a big broker's departure, like the loss of associated revenue down the road - as top advisers generate significant money for the firm - and the cost of hiring another broker team to replace the assets lost.
"It takes a lot of extra work to catch up when a big team leaves," said Alois Pirker, a research director at the Boston-based Aite Group.
Madrigano, who worked at Morgan Stanley's New York office, started at New York-based investment bank D.H. Blair & Co in 1989 and moved to Citigroup in 2000.
His move to JPMorgan Chase comes as the largest U.S. bank is increasingly emphasizing asset management in its business strategy. It is remodeling bank branches in higher-income areas to emphasize its "Chase Private Client" services with more private areas for meeting with wealthier customers about their investments.
Industry experts say more top advisers are looking at private banking as a new home for their books of business.
The private bank side appeals to advisers with large client asset bases because it allows them to potentially generate greater revenue through the private bank model, said New Jersey-based lawyer Tom Lewis, who represents brokers.
"You're not just buying them stock and mutual funds, but potentially a home loan or a mortgage or personal loan, or other types of financial instruments," he said.
Lewis said advisers using a more holistic private bank model can also charge flat management fees, instead of pure transaction fees.
(Reporting by Ashley Lau in New York; Additional reporting by David Henry; Editing by Lisa Von Ahn, Walden Siew, Leslie Gevirtz)