It's the best of times and the worst of times for wealth management firms amid the fast-moving bank crisis.
Advisory and brokerage shops are playing defense, rushing to reassure and educate
It's all shaping up to be something of an existential crisis for some wealth managers.
"I do think that advisors really need to take stock as to where they currently affiliate, where they're thinking about affiliating, that other name on their business card," Manish Dave, the senior vice president of Business Development and Experienced Advisor Recruiting at Minneapolis-based regional firm Ameriprise Financial, said.
"What do they represent? What's their financial foundation, what's their financial stability?"
The shock collapse of the nation's 16th-largest bank one week ago — followed by scares at West Coast bank First Republic, which
The market-rattling events of the last week have "turned that dial further, much more quickly," Dave said.
Take an advisor whose firm is what Dave called "1% or 2% off-course from how they're thinking about the business." While that mild disconnect may not affect what an advisor will do career-wise in the short term, "over the long term, you find yourself in waters that you weren't expecting to be in," he said. "And I think a lot of people right now are finding themselves there."
On Friday, the parent of Silicon Valley Bank, SVB Financial Group,
Chief among them: Teach clients what is really happening, delineate how your firm is different from the ones in the headlines, ensure deposits are protected, consider your options and keep in mind the longer-term possibilities for your career, as well as your clients' best interests.
Keeping communication open
Clients often take their cues from headlines about SVB, the second-largest bank failure in U.S. history, without reading the article, according to Nick Juhle, the chief investment officer at Kalamazoo, Michigan-based Greenleaf Trust.
"A lot of our clients, they're not necessarily super sophisticated." Juhle said.
"Late last week, and then over the weekend, in particular, Monday and Tuesday of this week, we just had an overflowing of incoming calls from our clients."
Greenleaf, a Michigan chartered trust only bank, is a wealth management firm that offers trust administration, financial planning and asset management services. It doesn't have a lending business, and is not a depository institution like Silicon Valley Bank — a fact many Greenleaf advisors have to remind their clients of, Juhle said.
With banking and market news coming thick and fast, advisors need to be on call and prepared to hold clients' hands — and educate them about the crisis. A customer's first question, of course, is whether their own money is safe.
"Anything above $250,000, you might want to start to spread it out a little bit, but if you're under $250,000 in deposits in a bank, you're safe," said Scott Nasca, the president and founder of Generation Capital Management, a registered investment advisor in Rochester, New York.
The Federal Deposit Insurance Corporation
Regulators took the
For clients with funds in excess of the FDIC insurance limit at wobbly banks, things get complicated. Treasury Secretary Janet
It's also a good time to communicate with clients about whether their current portfolio strategy needs adjustment. "For clients, you just want to make sure that you're in the right investments and have the right risk tolerances for your goals," Nasca said.
The long-term fallout of the still–unfolding crisis may include increased interest by advisors in ditching a brokerage to go independent, adding to an
The last week may have made advisors "more comfortable with going independent," said Dana Wilson, the CEO and founder of Black and brown financial professional networking service CHIP (
"Larger institutions really need to be mindful of that."
Making moves
Near-term, industry recruiter Jason Diamond said that wirehouses are most likely to gain from any exodus of advisors at collapsed institutions.
"You have to recognize that the biggest and most established firms are probably the most immediate beneficiaries of this," Diamond said, adding that the wirehouses "are among the firms best prepared to facilitate a fast move, to alleviate client concerns."
"Your clients have just been through something fairly traumatic," he added. "And if you're going to ask your clients to come with you, I think you have to offer relative stability and a known entity."
Said Ameriprise's Dave: "We think that consolidation will probably be a likely outcome in this environment. Advisors at regional banks will be well served to consider how they may benefit from partnering with a firm like ours, that is a full-service, financially strong wealth management firm."
Some SVB advisors are taking a
The FDIC, reached for comment on this story, declined to respond.
Jason Miller, a partner and the chief operating officer at RIA Crewe Advisors in Salt Lake City, said SVB advisors have a unique skill set that would be valued at many firms, given their expertise in serving entrepreneurs. "You can deliver a lot of value to clients when you have a specialization."
He urged advisors in these situations to not rush their moves and still conduct due diligence.
"Advisors have to be really careful [with] the home that they choose, because if they're doing it for their clients, then they need to make sure it's the right home for those clients. Or they may not have a successful transition."
