Blog – Page 10 – Broker Transition

May

2015

Job Uncertainty, Increase in Advisors Lead Top Branch Managers to Smaller Firms

From the Desk of Jim Eccleston at Eccleston Law LLC:

In a recent market trend, top branch managers are leaving national wirehouses for smaller firms. This trend can be attributed to two distinct causes: job uncertainty and an increase in the amount of assigned advisors.

Previously a secure job, firm merges and a reduction in the number of total branches today have led to uncertainty. Given fewer opportunities for branch managers to find employment, or continue, at wirehouse firms, managers also now receive less pay.

Not only is there uncertainty and less pay surrounding the position, branch managers find themselves having to manage two to three times more advisors than before. This makes it tougher for a branch manager to have a direct impact on an individual advisor’s business. Instead of focusing on their advisors’ practices, branch managers find themselves in a constant cycle of recruiting additional advisors in order to keep a branch’s metrics.

All of those facts have caused many top branch managers to switch from wirehouses to smaller firms. In those smaller settings, branch managers have greater job security and are able to spend more time with their existing advisors. In addition, managers are given the freedom to coach and run a business, in addition to recruiting—things that attracted managers to the position in the first place.

The attorneys of Eccleston Law LLC represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services.

May

2015

New Obligation: Continuity Plan Required At Investment Advisory Firms

The North American Securities Administrators Association (NASAA) has developed a model rule outlining policies that investment advisers should have in place to respond to natural disasters or the death or incapacitation of an executive.

The NASAA rule requires every adviser to adopt written procedures for business continuity and succession planning, and shows how firms will protect books and records, establish an alternative means of communicating with clients, relocate the office, reassign key personnel and generally minimize disruption to the business.

The rule allows flexibility in the plans. They can vary based on the adviser’s size, services and locations. The model rule must be adopted by individual states before going into effect.

Mar

2015

Taking Over An Adviser’s Book Can Be A Challenge

From the Desk of Jim Eccleston at Eccleston Law LLC:

According to InvestmentNews, taking over a retiring financial advisers’ business may sound easy compared to the business development effort it takes to recruit an entire practice of clients, but it could be a challenging task.

Advisers may face hurdles establishing trust with clients or just navigating a mixed bag of client personalities and their multiple situations. Likewise, depending on the extent of the takeover, advisers may find themselves dealing with new employees and potentially incompatible technology.

A few points to consider: First, if the business has focused on different products, the difference would require a lot of education about the options available to clients.

Second, personality is a big part of why someone chooses to work with an adviser. As a result, it can be challenging if the new adviser’s character doesn’t match up well with clients.

Third, with acquisitions of larger practices, sometimes employees come along with the deal. That, too, can be a positive or negative factor. Staff can help with clients for some continuity, but it’s also difficult sometimes for employees to accept the new ownership group.

Fourth, it’s not always the case that the retiring adviser will introduce his or her successor to clients. One concern is that it’s hard to show clients what the new advisers can do differently to add value to the relationship while the original adviser is sitting there.

Mar

2015

Bank Of America-Merrill Lynch Ready to Exit Protocol

From the Desk of Jim Eccleston at Eccleston Law LLC:

According to AdvisorHUB, many signs including the cross-selling, Merrill Edge, US Trust, bank referrals, team analysts and new non-compete contracts, have showed Bank of America/ Merrill Lynch are ready to exit Protocol.

One manager on the East coast at Merrill said the deal structures that Merrill is putting together right now have given advisors many significant pauses. Almost all of the deals have outsized total percentages but also contract lengths. And there is an active program to recruit back Merrill advisors that left the firm 5 – 6 years ago and offer them an extremely lucrative payment. The problem is how the firm can be assured that it will recoup all of that cash.

A director in Merrill Florida branch was concerned about analyst non-compete contracts. The new contracts for team analysts and junior advisors and the non-compete language are about the way to ensure that some members of larger teams are forced to stay at the firm should the senior members leave. Reps are concerned that similar provisions will apply to the tenured advisors.

Other voices are from NYC. They project that Merrill is going to lock up as many legacy recruits as possible, discontinue recruiting, pull out of the Protocol, and elicit non-compete and non-solicit contracts.

Feb

2015

Ameriprise Profits Rise But with Fewer Financial Advisors

From the Desk of Jim Eccleston at Eccleston Law Offices:

In 2014, Ameriprise Financial’s wealth management reported $792 million in profits, up 33% year-over-year. Total client assets in the last quarter in 2014 for the firm’s wealth management division rose to $444 billion, a 9% increase year over year. Total revenues for wealth management grew 11% year-over-year, rising to $1.2 billion from $1.1 billion.
However, the firm’s financial advisor headcount was down. The number of employee advisors fell to 2,083 from 2,205 for the year-ago period. The ranks of independent advisors grew year-over year, rising to 7,589 from 7,511.
Retention rates were slightly down. For employee advisors, the figure fell to 91.2% for the fourth quarter in 2014 from 92% for the same period a year ago. For independent advisors, the rate dropped 94.5% from 94.7%.
There was some consolidation in the independent advisor channel, as some advisors prepared for retirement by selling or transitioning their practices to other advisors.
Productivity remained strong across both channels, but especially among new hires.
In a press release, the firm said recruiting remained strong as Ameriprise picked up 73 experienced advisors across both channels during the quarter. Productivity grew 13% year-over-year, rising to $496,000 in operating net revenue per advisor.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services.

Feb

2015

Whistleblower Receives $57M Award in Second Lawsuit Against Bank of America

From the Desk of Jim Eccleston at Eccleston Law Offices:

Edward O’Donnell, an ex-Countrywide Financial Corp. executive, will receive $57 million for a second whistleblower lawsuit accusing Bank of America Corp of bilking Freddie Mac and Fannie Mae through the sale of home loans.

The case became known as the “Hustle” case due to Bank of America process through which the loans were sold. “Hustle” referred to HSSL, which stands for high-speed swim lane.

Bank of America consented to settle the case for $350 million as part of a wider $17 billion deal to settle mortgage fraud claims.

For filing his whistleblower lawsuit, O’Donnell’s share is 16% of the recovery plus another $1.6 million. His award comes from the part of the settlement, which the bank reached with federal prosecutors and the states of Illinois, New York, California, Maryland, Delaware, and Kentucky.

Jan

2015

SEC Approves New FINRA Background Check Requirements for Reps

From the Desk of Jim Eccleston at Eccleston Law Offices:

A new FINRA proposal that requires brokerages to strengthen the background reviews they conduct on new hires has been approved by the SEC. The new rule will be implemented in July, 2015.

Under the new requirement, firms must adopt written procedures to verify the accuracy and completeness of a broker’s registration information on Form U4. That document is the foundation of the broker profiles contained on the FINRA’s BrokerCheck database that investors can review before hiring a financial adviser.

Both for new registrants and those newly hired, firms must conduct a search of “reasonably available public records”, such as those pertaining to criminal history, bankruptcy, civil litigation, liens and business records. The background check must be completed within 30 days of a U4 being filed with FINRA.

However, the additional requirements likely will increase compliance time and costs for financial firms. Likewise, financial advisers will need to be increasingly vigilant in protecting their employment records, including taking action in arbitration to correct false and defamatory remarks.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Jan

2015

Top Five Upward Concerns for Advisers in 2015

From the Desk of Jim Eccleston at Eccleston Law Offices:

Financial advisers are serious about growing their businesses in 2015. On one side, they see plenty of opportunities for growth; on the another side, they also see the uncertainties, like broker-dealer consolidations, the possibility of increased regulation and the mixed blessing of multiple business models to choose from.

First, broker-dealer consolidation is unprecedented and on the minds of financial advisers. Firms should expect to have answers to tough questions if they hope to recruit advisers, like what does a recent buyout or merger mean for my day-to-day operations? Will it affect the level of service? What about payouts and expenses?

Second, rather than setting up solo practices, the trend for advisers to tuck into existing broker-dealers, RIAs or branches will continue in 2015. Advisers often worry about the distractions involved in setting up a solo practice. The set infrastructure, economies of scale and built-in back-up support in ensemble practices are attractive to advisers looking for independence. In response, we expect firms to continue to present plenty of tuck-in choices for transitioning advisers.

Third, the lack of financial advisory businesses for sale will continue to frustrate growing advisers. Advisers are looking for books of businesses to buy in an effort to grow their practices. But the current reality is there just are not that many businesses for sale and we don’t see this changing anytime soon.

Forth, rumors of increased regulation, particularly in the RIA-hybrid arena, give advisers pause. In general, this new regulation could fall to the broker-dealers to provide more oversight. So far, this added level compliance doesn’t seem to be a deal-breaker for advisers attracted to the flexibility and growth potential this business model offers. However, firms should be prepared to address the concerns with advisers in transition.

Fifth, financial advisers are taking a good hard look at their practices to identify gaps and potential areas of efficiencies. Once advisers identify areas for potential growth, they are reaching out to their current broker-dealers, custodians and clearing firms for support and resources in their efforts to expand. When advisers don’t feel like they are getting the support they need, they start to consider a change in affiliation.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Dec

2014

Merrill Lynch / Bank of America Changes Broker Bonus Payments for 2015

From the Desk of Jim Eccleston at Eccleston Law Offices:

Merrill Lynch has told its brokers that they will receive higher bonus payments in 2015 for attracting new clients and assets, but will eliminated pay for servicing clients with less than $250,000 in assets.

Merrill Lynch will pay brokers 0.1% of new assets clients use to obtain loans, banking and trust products, or to put into fee-based advisory accounts. The cash bonus – half paid at year end and half over eight years – doubles the 0.05% paid this year for such “strategic” money.

Brokers attracting over $10 million of such assets receive 0.2% and brokers reaching $50 million receive 0.23%. However, bonuses in 2015 are being halved for new money put into low-profit money-market or bank accounts.

Moreover, Merrill brokers who bring in at least two new eligible households will receive a bonus of 0.15 percent of the new assets next year – triple the 2014 bonus. If they combine two new households with new strategic assets above $10 million, they collect 0.3 percent of the assets.

Brokers’ core pay is not changing in 2015. They will receive between 20 percent to 48 percent of the fees and commissions clients pay Merrill, with higher producers earning the higher payouts.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Dec

2014

Merrill Lynch / Bank of America Wants Former Reps to Return to Merrill

From the Desk of Jim Eccleston at Eccleston Law Offices:

Merrill Lynch is offering former brokers 400% transition deals to return to the firm and sing its praises. Merrill’s current advisors are not happy about the strategy. The new program specifically is reaching out to Merrill advisors and teams that left the firm during the financial crisis. Merrill is offering the premium deal and is promising to payoff (upfront) any and all remaining forgivable loan balances that remain at their current firm.

We highly recommend that advisors retain competent securities counsel to negotiate those deals, in advance of any such transactions.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.