Clients, Brokers Run to Smaller Firms as Merrill Gives Deadline on Int’l Accounts
As the clock ticks down on Merrill Lynch’s banishment of brokers who service anything but the largest accounts of non-U.S. citizens, several smaller broker-dealers are rushing in to grab the spoils.
Bolton Global Capital, a Massachusetts-based independent broker-dealer and investment adviser has established a rapidly growing annex in Miami, Florida, that it is larding with Merrill emigrants. The latest, who joined this week, are Edilberto Moreno and Soraya Batista Garcia, who had each been with Merrill for almost 20 years and as a team manage around $160 million of client assets.
The assets are not ones Merrill cares much about. In a letter sent recently to thousands of foreign-based clients with less than $1 million in their accounts, Merrill told them that after a long review that began in 2012 it can can no longer “effectively serve your wealth and investment needs” because of “business requirements” and expanding regulatory restrictions.
“Having completed this analysis, we believe you will be better served by a firm or firms that can meet your comprehensive wealth management needs,” Ileana Musa, Merrill’s head of global client segmentation and strategy, wrote in a memo reviewed by AdvisorHub and shared by a recently departed advisor. “Your account(s) must be closed by October 1, 2016.”
Bank of America-owned Merrill has been even tougher with the brokers who service such accounts. It is limiting new accounts to those with a minimum of $2.5 million, and has truncated the list of home countries it will work with to 29 from around 85. That follows a recent company requirement that all non-U.S. residents travel to the U.S. annually to affirm their account ownership — a border-crossing requirement that many clients cannot comply with for financial or other reasons, according to brokers.
Not surprisingly, brokers have been running to the door. Bolton has leased a second floor of space at its Brickell Avenue office in Miami, said Ray Grenier, the firm’s chief executive.
In addition to the duo joining this week, Bolton in the past half year have hired teams led by Merrill alumni Graciela Perez with $300 million and another $160 million team led by Eduardo Robson and Daniel Aymerich in Miami, and also has hired from other big firms, Grenier said.
“We expect this is just the beginning,” Grenier said, estimating that more than half of Bolton’s $5 billion in client assets come from non-U.S. clients. ”There has been a substantial migration from the wirehouses.”
Bolton is not alone. Last month, Dynasty Financial Partners helped a broker in Florida who managed about $400 million of Latin American client assets set up shop as an independent while Steward Partners, a hybrid registered investment advisor and Raymond James-affiliated broker, landed a $325 million New York-based Merrill alumnus with a book of German clients. Merrill sold most of its European retail operation to Julius Baer in 2012.
In February Snowden Lane Partners, a brokerage boutique founded by ex-Merrill executives, hired Alex Arista in San Diego and Raymond James & Associates in January opened its doors to Eugenio Arango, who managed about $400 million of client assets at a Coral Gables, Florida, office of Merrill.
Roberto Garcia, who was let go by Merrill in 2012 as Merrill began its winnowing, said he understands why new tax-reporting laws and tightened money-laundering regulations are making it uncomfortable for big banks to work with foreign clients.
“After giving up billions and billions in the mortgage mess, Bank of America doesn’t need any more noise because of a small client in Venezuela or Colombia or whatever,” said Garcia, who now works at Mora Wealth Management, a Miami-based affiliate of Andorra’s MoraBanc. “All the big firm are questioning their private banking” units.
Bolton CEO Grenier said it is easier for small, privately held broker/dealers and investment advisory firms to deal with the new restrictions and invest in technology and advisor compensation because they do not have to worry about shareholders.
“We have the same challenges. The difference is just in terms of the cost structure of the major firms,” Grenier said. “When you look at all the costs and overhead that they have, compensation to the FA ends up being cut in the end because they have to hit certain margins.”
A spokeswoman for Merrill Lynch did not return a request for comment.
Merrill, which recently cited the departures of brokers with international clients as a reason for its moderate growth in advisor headcount, is battling a class-action complaint from brokers alleging that the firm misled them about its commitment to international clients.