What do the ever-evolving recruiting practices telegraph to advisors about the ideal candidates and overall hiring strategy of the firms—today and in the future?

Much can be learned by observing a firm’s recruiting practices.

For example, three years ago when Morgan Stanley and UBS pulled out of the Protocol for Broker Recruiting, it signaled a shift from prioritizing growth through the recruiting of competitive hires to a focus on organic growth and preventing attrition. And while Merrill still remains in the Protocol, the firm has done little to no competitive hiring, choosing instead to recruit young salaried advisors for their Accelerated Growth and Community Markets program.

Fast forward to the last 12 months, when Morgan and UBS have become quite active in recruiting once again—with Morgan making it clear they have their sights set on attracting the most productive advisor talent in the industry, bringing in eight billion-dollar plus teams – over $14B in assets – in the last year.

But on the other hand, UBS and Merrill have made some “interesting” recruiting decisions during that same time period—Merrill, in particular, with three of their most significant hires being advisors from bank programs. UBS, on the other hand, has been an active recruiter of top teams from their competitors, yet like Merrill also brought in five significant private banking teams—four since the beginning of 2021.*

For firms that have traditionally focused almost exclusively on recruiting competitive advisor talent – and were historically “lukewarm” about private bankers and bank brokers – these are truly “interesting” hiring decisions indeed. Because while these bank advisors may have built strong businesses elsewhere, they can be less-desirable recruits—and here’s why:

• Their books are less portable—“stickier” to the bank they come from because, in many cases, the relationships originated from internal referrals.
• Bank advisors are accustomed to working in a more siloed construct where relationship management and investment management are divided amongst different team members—and this creates 2 potential issues:
  • Unless the entire team is recruited, they’ll never capture all of the client relationships.
  • These bankers tend to be less self-sufficient because they rely heavily on the banks’ infrastructure for support.
• Private bankers often must abide by garden leave provisions in their employment contracts—so they’re riskier, more expensive hires because the prohibition to contact clients for a 30- to 90-day period is often detrimental to overall portability.
• Their assets almost always take longer to move than their wirehouse counterparts, typically moving only 12-25% of their assets over a two- to three-year period—because the client relationships are often more fractured amongst team members and less directly-related to any individual advisor.
• Bank advisors, particularly private bankers, work in a salary-bonus construct—so the “eat what you kill” traditional brokerage comp model can be challenging to adapt to.
• And, while they may have been mega-revenue generating top teams in the banking world, private bankers will most often be valued as much smaller fish in the larger pond of the wirehouse world—because it’s likely that at least some of their client assets won’t move with them.

What does this activity say about where these firms are headed?

So it begs the question why firms like UBS and Merrill – the latter, in particular – would be recruiting these teams to the exclusion of the more traditional, like-minded, and essentially “more productive right-out-of-the-gate” advisors?

Are these hires anomalous happenstance, or is there a method to each firm’s madness? Are they, in fact, interested in shifting their focus from employing traditional advisors with the biggest books of business—and paying big money to do so? Or are they inching toward an interest in “private bank advisors”—morphing a sales force and their ideal candidate archetype? And are these further signs that they are moving closer to a salary-bonus model?

There are a few things we can hypothesize about UBS and Merrill judging by their recent recruiting activity:

1. They want advisors that will leverage all aspects of the firm—especially banking and lending.
2. They want advisors with stickier assets and who will be more captive for the long-term—that is, advisors who will be less likely to change jerseys or jump ship when their deals are up.
3. They like teams—because it’s harder for them to leave as a group than a single advisor.
4. And it’s much less expensive to recruit a private banker—because the deals are almost always less up-front heavy and more weighted toward backend growth bonuses.

With so much going on in what seems to be a constantly evolving landscape, it can be difficult to step back and take a bigger picture look at the signs and signals around you—but it’s critical to remain aware, particularly as an employee advisor whose future is guided by the firm you work for.

That said, it’s imperative to always check-in with yourself and your goals—and likewise, stay current on the opportunities around you. Because while change happens over time, its impact can often feel instantaneous—particularly when you’re not expecting it.

*Note: Since this writing, UBS hired a Bank of America private banking team, as well as 2 teams from J.P. Morgan private bank, one managing 10.2M and another managing 20M, while Morgan Stanley welcomed a team managing $2.8B from J.P. Morgan private bank.

As seen on WealthManagement.com…