Advisors in Motion
Cover Story
By Howard J. Stock
April 1, 2009

As the industry consolidates, many more bank and wirehouse brokers are on the move, especially those dislocated by big mergers. So if you're looking to change positions or expand a program, it's important to know what banks are looking for and what you should look for in a bank. In today's topsy-turvy environment, that can be a moving target.

Figures from BrokerHunter.com, an Atlanta-based financial services job listing company, paint an extraordinary picture. Domestic openings for advisors across the industry that are listed on the site have remained the same since last September, at around 2,000. But hits to the site from advisors looking for new positions have tripled over the same period, to 84,275."There are a ton more people looking," says Steve Testerman, president and founder of BrokerHunter.com. He can track who's looking because site users must subscribe. "We have thousands coming in each month from the wirehouses and the big banks that made all the headlines," he says. "Merrill Lynch guys are grumbling big time."

While there are no doubt a lot more than 2,000 jobs available that aren't listed on this site, there are now many more people looking, including scores of wholesalers and account managers jettisoned by beleaguered product manufacturers. This means that job openings are awash with applicants. "We'd normally interview three or four advisors for an opening at a bank, but the last one attracted 15 advisors, all extremely qualified, all vying for that one position," says Jay McAnelly, executive vice president of IPI, a third-party marketer in San Antonio, Texas. All third-party marketers are telling the same story.

Bank recruiters usually target lower-tier wirehouse brokers because they have been through aggressive training programs and know their stuff, but have for some reason hit a ceiling at less than $500,000 in production. These recruits can also be more desirable than banks reps because they are much more likely to bring clients with them. Rampant culls at wirehouses are spilling hundreds of just such advisors into the market. "Merrill Lynch is cutting off its sub-$300,000 producers, and we'll take on as many of those guys as we can," says Tucker Muhrer, senior vice president of business development at Fintegra, a third-party marketer in Minneapolis that has 250 advisors on its books, up from 185 two years ago.

And more of those wirehouse reps are now interested in working with banks. Roseanne Roberts, a principal at recruiting firm R.M. Roberts & Associates in Santa Fe, N.M., typically only works with community banks and credit unions. She's never been busier: "I've been getting calls from banks that are expanding and I'm also getting calls from wirehouse advisors, which is unusual. But they're now looking for jobs at banks." As Muhrer observes, "Wirehouse reps used to see bank brokers as losers because if they were any good they'd be at a wirehouse. Those wirehouse reps are eating humble pie right now."

But the attraction between wirehouse reps and banks is fraught with cultural problems and this bodes well for bank reps looking for work. Banks don't want the stereotypical predatory wirehouse stock-jockey who is just out for himself. "Prima donnas don't fit into our environment," says Sandra deChastain, a regional program manager covering the West Coast at CUSO. "Advisors obviously want to make money, but there has to be a strong service element. I've spoken to some real heavy hitters who just wouldn't fit in our world." The wrong hire can quickly alienate customers and bankers, especially in a difficult economy, says Fintegra's Muhrer. "Ego is why, historically, we haven't targeted wirehouse reps," he says. "Driving up in a Porsche wouldn't fit well in this market. Banks need a team player, someone who'll be part of the branch system and who will refer back."

Hybrid Brokers

Harold Baker, program manager at Clearfield Bank & Trust, a community bank in Clearfield, Pa., used to be a regional manager with Harris Bank in Chicago, so he's hired reps at large and small banks. He joined Clearfield's sleepy investment program two years ago, increased the advisor headcount from one to three, including himself as a producing manager, and doubled the assets to $34 million. While he doesn't exclude wirehouse reps, he remains wary. "I've hired them in the past, and the toughest thing for them is always to learn that they're not the lone wolf but part of the team," he says. "They also don't have the freedom they once had with their time-if you turn up at 9 a.m. And leave at 3 p.m., why would bankers working longer hours refer you business?"

According to Baker the ideal rep is a combination of a wirehouse and a bank rep. While wirehouse reps can be too aggressive for a bank's team environment, traditional bank reps can be too passive. "Bank reps are often so used to referrals that they don't know how to prospect," he says. "I need someone who can treat referrals well, but who also knows how to prospect, such as through mining centers of influence. Advisors who have grown up in the bank environment often don't have these skill sets." CUSO's deChastain concurs-playing well on a team is important, but playing well on a winning team is what ultimately counts. "I definitely look at production; we want someone with high goals," she says. "I may find a perfect cultural fit, but I'd have a problem with an advisor who is comfortable producing $50,000 a year."

The good news is that banks and third-party marketers are perpetually searching for new talent, so if you're looking, it's worth expressing interest at attractive firms even if you don't want to move just yet. For example, PNC, which currently has 440 advisors, is looking to hire 250 more over the next two years to work the branches it acquired through National City, a bank that had relied on a platform-style program.

John Rhett, chairman of SunTrust Investment Services, prefers bank reps to wirehouse brokers. The Atlanta-based banking giant, for example, has 571 advisors now, up 61 from 2008 and it's still hiring. Most of these advisors are investment consultants working the retail side. He wants a few more wealth advisors, but says the retail side is where the money is right now. "It's much more lucrative because people are looking for security and income replacement," he explains. To get the 30 or 40 net advisors he wants he'll be hiring 80 to 100 advisors and keeping the best. "We're looking for someone with $300,000 to $600,000 in production, but also someone with ethics, who understands how the bank channel works, and that person will most likely come from another bank," he says. "We're good at hiring the $300,000 and $400,000 producers and turning them into $800,000 or $900,000 producers."

IPI's McAnelly says geography comes into play-a bank's sweet spot for production in the northeast is normally $350,000 to $500,000 in metropolitan areas, but it's around $180,000 to $280,000 in the southeast. Generally speaking, though, program managers want someone producing a minimum of about $250,000. "No one's going in for less than $20,000 per month," says recruiter Roberts. Rural areas may be an easier place to find jobs. Fintegra's Muhrer had little choice but to court everyone with a license and a clean compliance record during a recent search in South Dakota. "I'd hire from Wells Fargo before I'd hire from Wachovia Securities," he says. "But in South Dakota where I was looking, there's a lot of land and not a lot of people, so there aren't many advisors to call on."

A clean compliance record is a must. "We do get 'yes' answers on FINRA paperwork, and there are complaints that are unfounded, but they must be investigated," Roberts says. "We'll talk to the rep, but we'll do extra investigation. And if we have a choice, we'll go for a rep who doesn't have a problem with his paperwork." Anyone who has a history of not getting along with their bosses is automatically red-flagged.

After that, it comes down to your values. Generally speaking hirers, are looking for civic-minded investors among prospective hires. When she asks, "Why are you in this business?" recruiter Roberts says, "I want to hear that while they were doing something else-this is often a second career-they were always investing or at least thinking about it." Clearfield's Baker asks, "What do you do in your free time?" to help him get a sense of how an advisor is likely to behave at work. "If someone goes skydiving by himself, it's clear he's a lone wolf," he says. "But if he coaches Little League or volunteers at a nursing home, it shows that he focuses on doing things with others, and that often involves leadership skills." Baker's other favorite question: If you suddenly found $100,000 in your pocket, what would you do with it? "It's interesting just to watch them. I know they're thinking 'What's he looking for?'" says Baker. "If the answer is 'I'd buy a Porsche,' big deal! What I want to hear about is how they'd benefit the community."

Off the Grid

While the advisor must be a good fit for the bank, the bank must also be a good fit for the advisor. And that involves pay. Signing bonuses do exist at banks, but their use is sparse. Big banks with household names pay upfront money for exceptional brokers. Howard Diamond, managing director of recruiting firm Diamond Consultants in Chester, N.J., says Wachovia's Investment Services Group, which sells investments through bank branches, will pay 100% trailing 12 months' production to advisors producing $1 million or more. And some small banks, such as First Northern Bank in Folsom, Calif., have experimented with upfront bonuses to lure high-profile producers (see "The Little Bank That Did"). But, "most banks aren't paying anything substantial, if at all," he says.

Still, advisors can haggle with potential employers over non-monetary benefits. Diamond suggests bargaining for the largest possible territory, a key element in the success or failure of a bank-based advisor's potential to grow. Roberts says a territory of $150 million, measured by the retail deposits in the branches a rep covers, should give an advisor sufficient opportunity to do well, whereas a $50 million territory will have an advisor "wondering why he's eking out an income." Advisors who accept a smaller territory because they're bringing over a big book of existing business should demand a higher payout, she says.

Payouts are pretty standard across bank brokerages, although each bank seems to have its own twist that makes it impossible to truly compare them. Generally speaking, though, payout starts at 22% for low producers and taps out at 40% for the highest. Payouts can be lower or higher, starting at 28% and capping at 35%, but don't automatically reject a bank whose maximum payout is lower. There may well be other overriding benefits that can make you more successful and a lot richer. "Is a 2% higher payout worth sacrificing a bank that guarantees five referrals per week?" asks Paul Werlin, president of recruiting and consulting firm Human Capital Resources in St. Petersburg, Fla. "Smart bank reps think beyond the grid."

Another factor is whether the bank pays gross or net on its grid, i.e., before or after it has covered expenses such as paying the third-party marketer its cut, says Tom Kane, president of Investment Program Solutions, a Washington, D.C.-based recruitment and compensation consulting firm. Net payouts discourage small tickets because the trading cost comes out of the pot before the advisor is paid. Kane recommends looking for banks paying gross, which is the industry standard.

The Best Draw

Find out if the bank offers anything to help you get going. Startup income is generally structured three ways: enhanced payout on sales for a limited period; a forgivable draw; or a nonforgivable draw. During the rep's startup period, usually six months to a year, an enhanced payout might mean a commission of one-and-a-half times the payout on production. This might be the best deal for an advisor who brings an existing book with him as he expands his client base at the bank.

A draw is a loan from the bank to bolster an advisor's income while he gets up to speed. If the draw is "forgivable," the advisor only has to pay the money back if he quits, leaves or doesn't live up to his production promises. There's no standard time period for a draw to be forgiven, although as a guideline, wirehouse reps usually have to stay two years after training.

If the draw is nonforgivable, the advisor has to pay back the loan. This is obviously an advisor's worst option, but when a bank is very small, or an advisor has an unproven track record, it may be as good as it gets. Forgivable draws are by far the most common format, though.

Other incentives that can help boost income include fees paid for referring business to other parts of the bank. "Some banks say it's part of the job; others pay," Kane says. In fact, group-oriented bonuses are now much more prevalent. Swiss wealth management giant UBS pays advisors a growth bonus of 15 basis points for $50 million or more in new deposits or loans, and that goes up in five or 10 basis-point increments from there. UBS has structured these bonuses so they act as retention tools: Half of the group bonus is paid in cash, half is deferred. Advisors should also ask about merits and performance incentives: For example, Wachovia pays a 2% bonus to advisors who grow their book by more than 15% in a year.

Don't forget employee benefits. Health insurance and a 401(k) plan with matching benefits are more important than ever in this economy. And while these benefits may be fixed at the largest institutions, smaller firms may tweak them as part of an advisor's contract, so include them in the negotiation process, says Kane. "At smaller banks, everything is on the table."

Find out whether benefits are paid on base pay or total compensation for the year. "It's changing where some banks have realized they have to pay total compensation to be competitive," Kane says. "More often than not banks pay on base because it's cheaper and less complicated. But advisors complain that they end up with tiny 401(k) matches."

Advisors should ask about each of these components if they're not addressed in the interview because "generally banks do a poor job of putting all these components together to show advisors," says Kane. "Banks that want an edge in luring advisors should put all this information in a glossy brochure."

Beset as it is with competition from other channels, this is a tough time to be looking for a job as a bank advisor, even though many program managers are increasing headcounts. Certainly they have the pick of a rather large litter. Bank-based advisors who fit the profile-$250,000-plus production, clean compliance, demonstrable history of teamwork-should be able to secure a position. (Just don't expect your shell-shocked clients to make the leap with you.)

The real winner in all this movement is the bank brokerage industry. Financial droughts tend to weed out the weakest players, who can't pay the bills on what they're producing. At the same time, banks should take advantage and gorge themselves on talent while so many mid-tier advisors are on the loose. "There has never been as much opportunity as there is right now to hire the best brokers in the business," McAnelly says. "That means it's also the best time to cut the dead wood from your program while the talent pool is so deep."