RBC Keeps Up Pressure on Wirehouses with Recruiting Binge
RBC Wealth Management for the second time in two weeks has reached into Morgan Stanley, picking up a bicoastal team in Boston and Los Angeles that last year produced about $5.5 million.
RBC, the Minneapolis-based U.S. wealth unit of Royal Bank of Canada, also has hired large teams from Merrill Lynch in recent weeks, showing an activism and a willingness to extend rich deals at a time when many larger competitors are retrenching.
The Core Group who joined RBC on Monday includes brokers Alex Sugar and Alex Davis in Boston, Grant DeVaul, Graham O’Kelly and Taylor Biehn in Los Angeles, and two client associates a spokeswoman confirmed. With the exception of Biehn, the brokers had worked together at Bear Stearns before jumping to Morgan Stanley in 2008.
Sugar, who co-founded the team with DeVaul in 1995, said that the team was managing about $800 million for Morgan Stanley customers but expects about $300 million in accounts the brokers “inherited” to stay behind because those accounts cannot be solicited under terms of their employment contracts at their former firm.
The veteran team chose RBC in an attempt to recreate the working environment and culture they knew at Bear, which had about 500 retail brokers prior to its purchase by JPMorgan Chase in 2008 during the heart of the financial crisis, according to Sugar. RBC has around 1,900 brokers as against the more than 15,000 at Morgan Stanley.
“We wanted to come back to something that was a little bit more homey for us,” Sugar said. “It felt comfortable for us to be here.”
He also said he was acquainted with Brian Katz, RBC’s complex manager in the Boston and another Morgan Stanley alumnus. Katz, who joined RBC in November after a two-year stint at Ameriprise, declined to comment beyond saying that RBC has an “easy story to tell.”
RBC has claimed several wirehouse wins in recent months including hiring Justin Ferdula, a Morgan Stanley branch manager in New York City, last week. Last month it added a $300 million team led by Joe Piche, who had been with Merrill Lynch in Wayzata, Minn. for a decade.
Recruiters and managers at rival firms said that RBC has become more aggressive with recruiting packages.
Larger competitors have curtailed back-end hiring bonuses that reward hitting future asset-transfer and production targets following the Department of Labor’s interpretation in November that such bonuses could incentivize behavior in retirement accounts that does not comply with its new fiduciary rule.
RBC has exempted transfer of retirement assets from its back-end offers to navigate the rule, but still includes back-end payment, the sources who declined to be identifeid said. Its recruiting deal can be as high as 250% to 300% of a broker’s or team’s trailing-12 production, competitive with top wirehouse offers even before the retrenchment, recruiters said.
The RBC spokeswoman declined to comment on specifics of its recruiting package.
The departure of the Sugar team from Morgan Stanley’s 125 High Street branch in Boston follows that of a $350 million team in the same office that joined Raymond James and a $1.2 billion team that went to Merrill Lynch a year ago.
A spokeswoman for Morgan Stanley confirmed the Sugar team’s exit but declined further comment..
Two sources familiar with his practice said the team was primed to leave in part because they had affected by Morgan Stanley’s tax reporting flub that affected clients’ filings and that led Morgan Stanley earlier this year to reserve $70 million to cover IRS penalties and customer reimbursements.