Sirianni to Wires: Time to Pay the Band
The financial crisis brought our industry to the brink, and changed the way we do business forever. It destroyed culture, began the recruiting prisoner exchange, and gave rise to the Independent movement. Now UBS, Morgan, and Merrill, have radically shifted the game back to where it started: with less recruiting and lower recruiting bonuses. The question is, can they? Who will do the work that seasoned branch managers used to do? And, maybe most importantly, will the rest of the industry follow?
UBS, Merrill, and now Morgan, have suddenly decided that their current Advisors matter more than mercenaries from another firm. They have discovered that time and money spent on retention may actually build a business for the long term. What’s next, will they actually look beyond the quarter for results, and run their firms like businesses rather than short term shareholders?!?
It’s a novel idea. Or should I say, it was a novel idea back in 1985. Back then, changes were easier to make because they had trained a corps of senior field leaders who helped develop and implement firm policy called: Branch Managers.
Good managers added value for their Advisors. Retention was as important as recruiting. As a former manager, I always felt that my best recruiting tool were the Advisors in my branch. Call them and ask if I actually helped them grow their business or not. My Advisors gave me the majority of my referrals. I did quarterly planning with all of them, from my 15 million dollar a year producer, to my trainees. I tried every day to make the branch a happy place.
Good managers also gave value to their firms. They had the trust of their employees, which made explaining new firm policies much less contentious. They grew their branches every year by recruiting new Advisors, and maximizing the potential of the ones they had. Recruiting skill separated the good managers from the mediocre. Bringing the right new Advisors to your branch helped all employees, and made them feel they were in a place others wanted to join. It was clear if you couldn’t recruit, you weren’t a very valuable manager.
There was the rub. Good managers were highly valued, and also had to be highly paid. One million dollars a year plus at the big firms. Once the crisis hit, they were the first line item to go. The big firms don’t want to hear this, but by screwing over their loyal managers they screwed themselves.
Managers were the bastions of culture and loyalty. Rather than spend money on them, and the retention and stability they could have brought, they decided to mortgage their businesses on a mercenary army of new Advisors replacing the ones that left (because their managers were not there to talk them down?) in an ultimately self defeating prisoner exchange, using inflated checks to lure anyone who fogged a mirror. They didn’t need a million dollar guy to wave a big check under someone’s nose, they could get a 100k guy for that.
Today they are paying the band. Someone finally did the math that all of the former branch managers who knew how to read their branch P&Ls, had done long before. 350% doesn’t work, its financially unsustainable. We are in an essentially low margin business, which suddenly Morgan, Merrill, and UBS have figured out, and at the low margins, retention and stability are the rule. So now, when they need their seasoned leaders most, the Wires don’t have them.
The old branch managers were treated so poorly that now no one wants the job. What it pays isn’t worth the hassle. Managements words of support ring hollow. Don’t senior execs realize that every person in the branch system saw how they treated their managers. They have now culled the ranks of compliance and lower producing brokers, even admin, to fill manager slots. Gone are competitive benches where would-be managers were groomed. Groomed for what one may now rightly ask: the random slaughter of corporate politics, or the sacrifice to compliance woes. The question the Wires need to ask is: How can someone who never sold a bond help advise a 15 million dollar a year producer?
Its going to be a rough ride. There just aren’t enough good Wire managers left on the local level to drive corporate policy, ensure respect, or add any real value. Many of them have gone to firms that were not competitors before 2010, but are genuine threats now. Stifel, Raymond James, LPL, smaller regionals like Janney, and the Independent diaspora are suddenly on a level playing field with the few remaining Wires when it comes to recruiting packages. Wires were net recruiting losers to Regionals and Independents before the old deals went away with the DOL (see Recruiting Wire).
Managers who were tossed aside have been taken in with open arms by the Regionals, and many have started their own Independent firms like Steward Partners, or Bridgeway. They are older, more experienced, and on the whole, more talented than the replacement wire managers who may have been in administrative roles a few years ago. They have something to prove, and now, finally, they are fighting the recruiting war with the same ordinance as their old adversaries.