Merrill loses $1.6B team to UBS amid exodus of firm lifers

For the second time in just over a week, UBS Group is announcing the recruitment of a wealth management team overseeing billions in clients assets from its rival Merrill.

The Swiss banking giant, with more than $3 trillion under management, announced on Monday that its private wealth management had added an eight-person advisory team named Hammond Fay Bush and Associates to its offices in Northbrook, Illinois. Members of the group previously had $1.6 billion under management for ultra high net worth clients and families at Merrill.

Ten days before, on Jan. 12, UBS announced it had brought over another advisory group made up largely of people who started their careers at Merrill. This time, it was a 10-person team, named GKB & Associates, with $2 billion in assets under management in New York.

Many of the people on both teams began their careers at Merrill and had remained there up until recently. At Hammond Fay Bush, for instance, the three firm principals — Jack Hammond, Susan Bush and Brian Fay — had worked at no industry firm besides Merrill before moving to UBS. Hammond started at Merrill in 2002, Bush in 1982 and Fay in 2015, according to BrokerCheck.

"We continue to focus on recruiting and retaining the most talented financial advisors in the industry," Andrew Dempsey, the market director at UBS Wealth Management, said in a statement. "We believe we have the strongest platform for financial advisors in the Americas, and with our suite of high net worth and ultra high net worth capabilities, advisors like Jack, Susan and Brian will be able to deliver the full power of UBS to their clients."

A Merrill spokesperson declined to comment.

The wandering herd

The two recruiting moves show Merrill's continued struggles to retain top advisory teams. Executives at the firm said in a recent earnings call that Merrill's annual attrition rate — the proportion of its advisors who leave in a given year — has been hovering around its historic average of 4% and has even shown signs of improving in recent months.

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But many in the industry point out that that nominally low figure obscures the fact that many of the teams leaving are those with the most experience and strongest client relationships. Jason Diamond, an executive vice president at the recruiting firm Diamond Consultants, said it should in some ways come as no surprise that advisory groups with the most years of industry experience are also those with the greatest propensity to leave.

"They are the ones who notice the most how much the firm has changed," said Diamond, who did not work on either of the UBS deals.

And Merrill has perhaps changed more in the past decade than any of its Wall Street rivals, said Diamond. Diamond, who did a stint at Merrill from 2015 to 2018, said it's in some ways misleading to refer to the firm as Merrill anymore.

Ever since its acquisition by Bank of America amid the housing market collapse of 2008, Merrill has steadily undergone a process of what Diamond deemed "bankification." Many decades-long employees, he said, can today scarcely recognize the firm they started working for.

"It really should always be called Bank of America Merrill Lynch," Diamond said. "For lifers who lived through the glory days, it's very clear now that it's Bank of America calling the shots and not Merrill."

To be fair, most large Wall Street institutions have undergone massive changes since 2008. Diamond said Merrill advisors' grievances arise not just from a perception that things aren't the same as they used to be but also from a litany of specific causes.

Many feel that their compensation is too closely tied to their ability to sell Bank of America products, that they're mired in bureaucracy, that the firm is too rigid about compensation and too averse to taking risks. Diamond said he seldom hears complaints about big-picture things like Merrill's technology offerings or trading systems.

"And it's very rare that you have someone who points to one single factor for why they are making a move," he said. "Once in a while, someone will say, 'It was XYZ policy.' But 95 out of 100 times, it's death by a thousand cuts."

Wirehouse woes

And it's not just Merrill. Similar complaints are regularly made these days against virtually all of its Wall Street competitors.

Jeff Nash, the CEO of the recruiting, and mergers and acquisition consultant Bridgemark Strategies, said he thinks long-simmering dissatisfaction with wirehouses coupled with stability in the stock and bond markets will make 2024 a big year for advisory team moves. He said that'll be true not only for wealth managers that move from one large firm to another — like the teams that departed Merrill for UBS. Advisors who've been thinking about going independent will also find new reasons for considering that step.

Nash said market conditions matter for recruiting moves because economic downturns tend to sap advisors' confidence. Rightly or wrongly, he said, financial planners often fear that clients will be less likely to follow them to a new firm if their investment portfolios have been showing lackluster performance.

With the stock market now in the midst of a bull run, and many predicting that interest rates will fall this year, the stars seem aligned for a recruiting bonanza, he said.

"We've seen quite a bit of activity this week alone," Nash said. "This year could be another one for massive exoduses of wirehouse teams."

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Nash said wirehouses are steadily coming to see that their real niche lies in offering an array of specialized services that are most useful to high net worth and ultrahigh net worth clients. Over time, he predicted, they'll come more and more to resemble the private banks that many of them already have on board to cater to the needs of the wealthy.

"And if you are an advisor serving the mass affluent client or even the lower-end high net worth client, does the firm even want you around?" he said.

With many firms' recruiting offers reaching record highs, Nash's advice is to, "not wait it out and get in front of it. With the deals so large, the advisors should get in front while the getting's good."

Turnaround possibilities

Merrill has itself recently revived its recruiting efforts with sign-on offers now reaching as high as 400% of a team's previous year's revenue. That again puts it in the same recruiting conversation as its big-league rivals UBS, Morgan Stanley and Wells Fargo.

But whether that will be enough to make up for the steady outflow of prominent teams is another question. Besides the two advisory groups recently lost to UBS, it also saw a 26-person team managing $5 billion leave for Rockefeller Global Family Office this month. Most members of that group, whose move was first reported by AdvisorHub, also started their careers at Merrill.

Diamond said he thinks Merrill's troubles in part lie in the stream of headlines announcing people leaving the firm. To counter the steady beat of bad news, he said, Merrill will need to make some noise of its own in the opposite direction.

Doing that will most likely require the firm to be willing to pay out even more than its most generous competitors for some top teams.

"It's really hard to get somebody excited about Merrill when all they hear is that advisors are leaving really," Diamond said. "So they will probably need to overpay for a couple of teams to get some meaningful wins on the board. And then, with those wins, maybe they can perpetuate some further wins down the road."