What shattered her faith in the company, and compelled her and Weinstein to leave the wirehouse, was the auction rate securities crisis in early 2008. Her clients had a total of $26 million invested in the securities-assets they would eventually get back after settlements were concluded-but Wilkes felt that, in hindsight, UBS did not fully disclose the true nature of the investments.
Based on some of the internal correspondence that was unearthed after the crisis hit, Wilkes says, "I just saw the firm protecting themselves at the expense of the client."
She and Weinstein formed Weinstein Wilkes Financial Group LLC in Fort Meyers, Fla., with about $400 million under management and with Raymond James as their broker-dealer, in August 2008. What she found, to her surprise, was that transitioning to an independent RIA wasn't as bad as the wirehouse "horror stories" indicated it would be.
The compensation, she says, is about the same. At UBS, advisors could expect a payout of 30% to 35%. As an independent, it's 85% to 95%, but that doesn't include the cost of running the business.
Also, the security blanket and the potential clients that came with working at a brand-name wirehouse were less relevant than several years earlier, she says. The nation's financial collapse took care of that.
"That benefit sort of vanished overnight," Wilkes says.
Byrne of UBS counters that the wirehouse was a leader in the way it responded to the auction rate crisis. The wirehouse, she notes, supported the auctions longer than any other firm and was the first to provide accurate market pricing and loans at 100% par value to clients.
"Our settlement applied to all our client holdings-private, corporate and institutional," Byrne says. "This allowed us to draw the issue to a close, unlike some competitors who had and may still have outstanding issues related to their institutional and corporate client base.
Edgar Parrish, who along with his wife Katherine, broke from Merrill Lynch in August 2009 to form his own RIA, Parrish & Company Private Wealth Management LLC in Bethesda, Md., also sees a permanent change in the financial services landscape-and the attitudes clients and advisors have about the big investment banks.
"I think that there are certainly some advantages to size, but I also think that can be a disadvantage," he says. "We've now seen how a few people and a few decisions can send a big firm into the arms of a purchaser."