Morgan Stanley Hires Merrill Pair from Private Wealth Mega-Team

A Merrill Lynch private wealth managing director on a tri-city California team moved with an associate to Morgan Stanley on Friday, while a second Merrill team in Colorado joined RBC Wealth Management two weeks ago.

Joseph Castagnola, one of six managing directors on the 36-person Jones Zafari group in Los Angeles, La Jolla and Palo Alto, California, joined Morgan Stanley in La Jolla, according to his BrokerCheck registration records. At least one other member of the team, relationship manager Nicholas J. Moore, moved with him, according to BrokerCheck.

Castagnola, who spent all but one of his 19 years as a broker with Merrill, ran Jones Zafari’s  San Diego-area operation, according to its website. His title of managing director generally indicates a broker who produces at least $2.5 million in annual revenue, according to a person familiar with Merrill’s compensation plan. His former team was managing about $16.5 billion of customer assets as of February, according to its website.

Castagnola confirmed his move but declined to comment further on his production or his reason for moving. A Merrill Lynch spokeswoman did not return a request for comment.

The hires indicates Morgan Stanley’s willingness to make exceptions to its Spartan recruiting regimen for so-called franchise players. The wirehouse last month reached into Goldman Sachs to hire David Midgley and two associates in Seattle who were said to have generated about $10 million in annual fees and commissions.

A Morgan Stanley spokeswoman declined to comment on Castagnola’s production numbers or on the firm’s recruiting strategy.

Morgan Stanley is one of two wirehouses that dropped out of the Protocol for Broker Recruiting almost three years ago, a move interpreted as a way to lock in veteran brokers because of its growing antipathy to expensive recruiting. UBS Financial Services also exited the Protocol, but has been more constrained about making exceptions to its experienced-broker hiring diet.

While Morgan Stanley CEO James Gorman continues to demand cost discipline, advisors at or near $1 million in production can command as much as 250% of their previous year’s production in upfront cash and back-end bonuses, according to recruiters. That is less than the 300%-plus multiple that it and other wirehouses were offering before they tightened their belts in 2017, but still substantial.

Morgan Stanley also has been more willing to recruit select sub-million-dollar producers to fill empty seats, according to recruiters. The New York-based firm employed 15,633 advisors as of June 30, about flat with 12 months earlier. UBS ended this year’s second quarter with 6,689 brokers in the Americas, down 248 from June 30, 2018.

Merrill Lynch’s core private wealth sales force fell by 130 brokers from a year earlier to 14,690 (excluding Merrill Edge brokers) as of June 30, and it has lost several million-dollar teams in recent weeks. Merrill Wealth President Andy Sieg said this summer that the firm’s hiring freeze remains in effect.

The Bank of America-owned broker-dealer on September 4 lost the Greenwood Village, Colorado, team of Darwin Campbell, Matthew Matherly and two associates to RBC Wealth, a spokeswoman for the Royal Bank of Canada U.S. unit confirmed. They were managing about $350 million in client assets at Merrill, she said.

Campbell, a 27-year brokerage veteran who was with Merrill a decade and also has worked at UBS Financial Services and Salomon Smith Barney, declined to comment. Matherly began his brokerage career in 2007 at UBS, and joined Merrill two years later, according to BrokerCheck.

At the end of August, a mother-son Merrill team in Atlanta managing $453 million in client assets, an eight-person team in Wisconsin managing some $540 million and a four-advisor team managing $326 million in California also left the Thundering Herd for RBC offices.