Morgan Stanley Lifts Big Team from JP Morgan in Beverly Hills
(Updates with response from JPMorgan spokeswoman in eighth paragraph.)
Although Morgan Stanley is “comfortable” with the small shrinkage in its brokerage salesforce, it continues to selectively engage in the wealth management recruiting wars, senior executives said on Tuesday.
The company confirmed on the same day that it reported a 1% decline in advisors and a lower compensation ratio that it hired a six-person team of veterans from JPMorgan Securities’ Century City office in Los Angeles last week to join its Beverly Hills branch.
Led by senior brokers Alan Solursh and David J. Pollock, who had been with Morgan and its predecessor Bear Stearns in southern California for 26 and 22 years, respectively, the team also includes 16-year JP Morgan advisor Shadi Mullin and three associates. Pollock was at one time manager of the JPMorgan branch.
The SPM Group, which has a niche serving athletes and entertainment industry clients, will also operate out of Woodland Hills to accommodate Solursh’s commute. It produces between $3 million and $4 million annually, said a person familiar with their production.
A Morgan Stanley spokeswoman declined to comment on the group’s production.
The hires further erode JP Morgan Securities Los Angeles presence, to the apparent benefit of some wirehouse competitors. Garrett Bland, a multi-million-dollar producer and former branch manager, left for the Morgan Stanley Beverly HIlls branch in September, while Jay D. Baumgardner, III, joined UBS Financial Services’ private wealth management group in Newport Beach that same month.
Another two-person team managing about $350 million of client assets left JPMorgan in Century City In November to join Merrill Lynch, while Antoine Souma and a partner who were managing around $3.1 billion of client assets at the JPMorgan office jumped in June to Morgan Stanley.
A spokeswoman at JPMorgan said the company declined to comment about the departures and whether it will replenish its southern California brokerage force.
Morgan Stanley Chief Executive James Gorman said Tuesday that while he continues to keep a sharp eye on expenses in wealth management, he acknowledges “the competitive dynamics in this business,” a reference to expensive recruiting wars among large firms for senior brokers.
The hiring dynamic has changed in the past year, however, due in part to the Department of Labor’s fiduciary “conflict-of-interest” rule set to take effect on April 10. The rule prohibits firms from offering large signing bonuses that are contingent on hitting future sales goals. As a result, traditional deals offering cash upfront with the potential for more on the back-end have been redesigned.
Gorman and other cost-conscious executives are said to have quietly welcomed the ruling.
“We have seen a slowdown in recruiting both in and out,” Chief Financial Officer Jonathan Pruzan said on an earnings conference call on Tuesday when asked about the firm’s net loss of 126 brokers during 2016 to 15,763 and its relation to the DOL rule. “This is a level we are comfortable with.”
The loss of some mediocre producers and the hiring of some select other brokers helped Morgan Stanley for the first time report average annualized revenue per broker above $1 million in the fourth quarter.
And the firm continues to recruit.
It has resumed cash bonuses that can reach 175% of the revenue brokers generated in the previous 12 months, several recruiters said, supplemented by half of the deferred bonuses they leave behind at their previous employer. Morgan Stanley also is offering a modified deferred bonus based on hitting client-asset transfer and production goals over several years, recruiters said.
A Morgan Stanley spokeswoman declined to comment.
Separately, despite beefing up its downtown Los Angeles office, Morgan Stanley has been without a branch manager at its Santa Monica office since mid-October. The former manager, Christopher G. Richert, was discharged over “allegations involving undisclosed gifts to a subordinate employee,” according to his BrokerCheck disclosure record. The alleged violations did not involve sales practice offenses and were not client-related, it said.
Richert, who had been with Morgan Stanley since the end of 2009 and worked for seven years previously at UBS Financial Services’ Century City office, could not be reached for comment. The Morgan Stanley spokeswoman declined to comment on whether the firm is looking for a replacement.