April 10, 2024
Louis Diamond Quoted
By Glenn Koch
UBS, Merrill Lynch and other large firms are actively recruiting private bankers and salaried wealth advisors using deals that boost recruits’ compensation while insulating against weak asset portability, according to recruiters.
Wirehouse appetites for hiring private bank teams have seen a “pretty large increase” over the past three years, and bankers are increasingly open to the idea of changing channels, recruiter Louis Diamond told FA-IQ.
UBS is the clear leader in this practice, with Merrill also cutting “a ton” of these deals, and Morgan Stanley, Rockefeller Capital Management and some of the larger broker-dealers also driving the trend, according to Diamond, president of Morristown, New Jersey–based Diamond Consultants. He estimated that an average of one large private bank team has been moving every two weeks or so. UBS and Merrill did not respond to requests for comment regarding their recruiting activity in this area.
The pursuit of these high-asset teams is not without its pitfalls, namely that clients’ assets are stickier to the bank and that bankers-turned-advisors don’t always rise to the challenge of shifting from a salary-based system to a commission-based one, recruiters note.
“In the past, the attitude of the industry was pretty lukewarm on private bankers — just too much risk, not enough portability —but we’ve seen a shift,” Diamond said.
“The secret sauce is to craft a deal structure that balances the risk at both sides. Basically, having some shared risk, where the private-banking team is able to get some money up front, to take some of the risk off the move, and then have a lot of incentives or hurdles to get a really healthy deal,” Diamond said, adding that the deals can equate to a typical “full-size” package given to a financial advisor if the back-end hurdles are met.
Diamond added that those who haven’t demonstrated an ability to build a client book or who are not comfortable with managing a smaller group of accounts are not likely to succeed.
“If someone is more, say, ego-driven, and says, ‘I need to continue to manage three billion in assets,’ or whatever the number is, the move’s not going to be right for them,” Diamond said.
Diamond also said that these hires are typically more successful when an entire team moves, versus a single private banker. Either way, he estimated that about 80% of these moves succeed, with 20% being “home runs.” As for the private bankers who don’t make it as advisors, most can return to another private-banking position relatively quickly and with little or no harm to their career, Rummage added.
Meanwhile, those who successfully make the transition will likely find themselves in a much better career space, according to Diamond.
“Even if these guys probably move 25% of their book, my guess is they’ll make more money than they were making at the private bank,” Diamond said, citing greater autonomy in business-building and staffing and a typically more open-architecture investment platform at the hiring firm as other benefits.
“It’s certainly not for everyone, but for the private bankers that are comfortable with business development and have even just a little bit of confidence in portability, it tends to be a significantly better move than going to another private bank or staying put,” Diamond added.
