Morgan Stanley Loses Brokers Producing $6 Mln-Plus to RBC and a New RIA
(Updated with comment from Paton in third paragraph from the end.)
In a sign that advisors may be gaining more confidence about steering their way out of firms that have left the Protocol for Broker Recruiting, a multi-million-dollar Morgan Stanley producer in New York City and a four-advisor team in Long Island overseeing some $650 million of client assets left the wirehouse last Friday.
Jason Lichtenstein exited his midtown office in Manhattan to join RBC Wealth Management’s nearby Avenue of the Americas branch, an RBC spokeswoman confirmed. Lichtenstein was described to RBC managers as a Chairman’s Club level producer, implying that he had been generating at least $2 million of fees and commissions, said one manager who spoke on condition of anonymity.
Lichtenstein, a sole practitioner who joined Morgan Stanley almost eight years ago from J.P. Morgan Securities, declined to comment when reached at his RBC office.
In Jericho, New York, a team led by President’s Club-level producer Lee Korn set up a registered investment advisory firm called Opal Wealth Advisors that is initially using Charles Schwab & Co. as broker and custodian for its customer assets. The team, which had been based in Morgan Stanley’s Great Neck branch, generated trailing-12 month production of about $4.5 million, primarily from three of its four advisors, according to Jesse Giordano, one of the brokers. It was managing about $650 million for approximately 350 clients, he said.
A Morgan Stanley spokeswoman confirmed the departures but declined further comment.
Following its exit from the Protocol just over a year ago, Morgan Stanley aggressively pursued advisors who it felt violated their employment contracts by contacting former clients. But brokers and their lawyers have learned to carefully navigate their exits to ensure they have not taken proprietary customer information, leading to a hiatus in courtroom filings for temporary restraining orders and corollary breach-of-contract complaints in arbitration.
“Protocol certainly makes the process more challenging because you can’t just take some the information,” said Giordano, who had worked with Korn and their fellow partner Joseph Filosa at Smith Barney before joining Morgan Stanley in October 2009. “It will take more time to reach clients doing it by the book, and we’ve gotten great guidance [from lawyers at Hamburger Law Firm].”
The team’s promissory notes for forgivable loans, along with those of other former Smith Barney employees, are at or near expiration, meaning they have no balances owed to Morgan Stanley.
Giordano, 40, said his team is looking to build a broader financial planning practice along with a more open menu of investment advisory choices (such as Vanguard funds) at the new RIA. The advisors have hired a business “leadership development” consultant and performance coach, Charles Clement, to advise clients—about a third of whom are middle-market business owners—about personal and business relationships to supplement the team’s investment advisory functions, GIordano said.
Opal Wealth, whose fourth advisor is Katherine Dean, charges an asset management fee of 50-175 basis points of customer assets, with a $1,250 quarterly minimum, according to the firm’s regulatory ADV filing. Schwab has agreed to pay the firm “up to a certain amount of money” to reimburse clients exit fees charged by other firms for transferring assets,” the document said.
RBC Wealth has made recruiting a priority since Michael Armstrong—who spent most of his career at Morgan Stanley—became head of Royal Bank of Canada’s U.S. brokerage arm in the summer of 2016. On Wednesday, it announced the hiring of Peter Opp, Joel Kozlak and Jessica wright from Merrill Lynch, where they spent most of their combined 57 years of brokerage experience. The Edina, Minnesota-based team had managed about $300 million in client assets at Merrill, which unlike Morgan Stanley and UBS Financial Services remains in the Broker Protocol.
In October, RBC hired Merrill advisors in Beverly Hills who were overseeing around $550 million.
On the flip side, the Minneapolis-based RBC last week discharged broker David Paton, who sources said was one of its largest producers in the firm’s St. Paul branch. Paton violated the firm’s order execution policy, according to a notation on his BrokerCheck record.
Paton, who works at The Oak Ridge Financial Services Group in Golden Valley, Minn., said that RBC never explained its reason for for discharging him and that he is considering legal action against the firm for wrongful termination.
Morgan Stanley, for its part, has quietly had a few recruiting wins at Merrill Lynch’s expense. Last week, it hired an Ohio team managing about $125 million of customer assets whose leader had been with the Thundering Herd for 12 years and an Atlanta advisor who had been with Merrill for 21 years.
In Tulsa, Okla., Morgan Stanley in early December welcomed Derek G. Johnston, a 22-year brokerage veteran who had been with Merrill since 2005 and joined as a senior vice president. Johnson was chafing over restrictions on his ability to offer some private placement investments to clients, said a person familiar with his practice.Reached at his Morgan Stanley office, Johnson declined to comment. His three former partners —Kurt Morgan, Donald Lehman and Matt Cain—remain at Merrill’s Yale Avenue in Tulsa, but have changed their 11-person practice’s name to MLC Group from JMLC Group.