The team will shape a strategy in light of its competitors' directions, which are already somewhat clear: Morgan Stanley Smith Barney is going for the stand-alone model, while Wells Fargo Advisors and Merrill Lynch have jumped on the universal banking bandwagon. All three have the captive broker setup, rather than the independent model, where Raymond James Financial Inc.  has made a name for itself. McCann insists there is no plan to spin off the division. Nor will there be any major acquisitions, and he will instead work with what he's got. And he has said he has no desire for the kind of scale that Morgan Stanley Smith Barney, Merrill Lynch and Wells Fargo Advisors boast, each with about 15,000 to 18,000 brokers. Big isn't necessarily best, he said.   UBS' recent advisor count was about 7,300. It's possible to be successful at that level, analysts say, but it will require the brokerage to make up for its lack in quantity with better quality. It will also mean they have to rebuild a good reputation, which Pirker says usually takes about three years. The group is already pruning the tree to make its brokerage force a bit on the higher end.

McCann says his priority is retention of top talent, which would help stop outflows. While brokers are notoriously focused on financial compensation, he says retention isn't all about money. "Really it's a much richer stew than that," McCann says. He plans to maintain an open architecture environment, pay brokers competitively, make UBS a place where they are proud to be, and ensure that clients trust them. Brokers are now awaiting the unveiling of a compensation plan for 2010, which typically is done this time of year. In November, UBS announced it will spread broker payouts on managed accounts over an entire quarter, rather than giving advisors their commissions in one lump sum at the quarter's start. The company says this will "reduce wide fluctuations in monthly compensation payouts," but it has irritated some brokers.   

Copyright © 2009 Dow Jones & Company Inc.

Main Street Securities B-D Now With National Planning
National Planning Corp. last month took over the broker-dealer operations of Main Street Securities LLC., and Main Street's 65 registered reps and more than $750 million in assets are now part of NPC.

No cash transactions were involved and no assets were transferred. For Main Street, the arrangement is seen as the best way to grow its business. Bobb Meckenstock, Main Street's president, says the Hays, Kan.-based firm didn't have the resources to do the massive recruiting needed to reach its desired size. "Our management team earlier this year decided we needed a partner in whatever form that takes," he says.

Meckenstock says Main Street will keep its corporate entity and its brand name as it operates as a branch office under NPC, a broker-dealer based in Santa Monica, Calif. Meckenstock remains president of the corporation, and is supervising manager of the branch office.

Small B-Ds Could Face Large Audit Costs
An amendment to a broad U.S. House bill aimed at financial services reform could ratchet up the audit costs for small independent broker-dealers, says the National Association of Independent Broker-Dealers (NAIBD).

The amendment proposed by Rep. Paul Kanjorski (D-Pa.) would require accounting firms that audit broker-dealers to be regulated by the Public Company Accounting Oversight Board (PCAOB), a nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee auditors of public companies. That includes audits of large, publicly traded broker-dealers. 

If passed into law, this measure would also include auditors of smaller, non-public broker-dealers. The problem, says the NAIBD, is the proposal doesn't differentiate between introducing (non-custodial) B-Ds who use outside clearing firms and don't touch client money, and larger custodial firms who directly handle client money.

Auditing standards for the latter are more complex and costly, says NAIBD Chairman Steve Distante, CEO of Vanderbilt Securities in Melville, N.Y. Applying PCAOB oversight across the board "could take out a group of independent B-Ds who can no longer afford to be in business," Distante says.

"Realistically, it'll at least double or triple the [auditing] fees," says Stephen Sussman, president and CEO of Regulatory Compliance, a broker-dealer compliance firm in Londonderry, N.H.