Branch Managers Break Away To Independence
(Dow Jones) The move to trim middle management at wirehouses is driving a growing number of branch managers toward independence.
Breaking away with years of experience and a hefty Rolodex, former branch managers are opening their own shops or joining independent registered investment advisory firms. In many cases, they are leaving with an already-experienced team of producing brokers.
After working at wirehouses for 28 years, former Smith Barney branch manager Glenn Fischer decided to go out on his own. In October, he and two Smith Barney brokers from his previous branch opened New York Wealth Management, an advisory firm in Garden City, N.Y., with $225 million in assets. The firm is affiliated with Raymond James Financial Inc.
Fischer says branch managers lost their autonomy as the wirehouses grew larger and compliance requirements and red tape expanded. Traditionally, branch managers were responsible for compliance, recruiting, training and the management of brokers. Many likened it to running their own businesses.
A spate of mergers, joint ventures and restructuring at major wirehouses during the financial crisis shrank the iconic company man's position and, in many instances, eliminated it completely. In September, Morgan Stanley Smith Barney and UBS AG restructured management, creating complex managers at main branches to oversee a number of satellite branches in each region. The moves displaced hundreds of non-producing branch managers and forced some to return to running their own books of business.
Those laid off or fed up with the changes are eyeing independence, says Michael Durbin, president of Fidelity Institutional Wealth Services. "They can leverage their skills, experience and relationships with financial advisors, many of whom they had previously recruited to their own branches," he says.
Custodians that safeguard client assets for independent advisors such as Fidelity Investments, TD Ameritrade and Charles Schwab Advisor Services, are stepping in to help facilitate these moves.
Former branch managers face distinct challenges when going independent. Non-producing branch managers don't have their own clients to start a business and must partner with other advisors to make the economics work.
"It's hard for branch managers to go independent unless they take a couple of steps back to go forward. It took 18 to 24 months before I could pay myself a dime," says Stuart Silverman, a former branch manager and regional president at now-defunct insurance brokerage firm Allmerica Financial. In 2003, Silverman launched Fusion Financial Network, which now consists of 260 financial advisors with about $7 billion in assets.
One opportunity for former non-producing branch managers could be with existing RIAs that are looking for help with recruiting and running the business, says Tim Oden, a managing director at Schwab Advisor Services.