The job isnt getting any easier for branch managers.
As a textbook example of middle management, the best ones are both the advocate of the advisor as well as the firms representative to the field, while successfully retaining credibility with both. Tout the company line too aggressively, and a manager will lose the confidence of his branch. Pound the table on behalf of the advisors too much, and the mother ship will find someone else.
Over the course of several weeks, I spoke with branch managers from both wirehouses and regional firms to get a sense of how they viewed their job now compared to several years ago. In addition, the regional firm managers were wirehouse veterans, and could speak authoritatively about the differences between big and small firms. In all cases, I granted the managers anonymity since they did not have permission from their firms to speak on the record.
So, how and why is it different today? The job pays much less than it did before, with less security than ever, and with a questionable career path.
The Morgan Stanley-Smith Barney merger led to dozens of branch managers losing their jobs because of redundancy. All of the wirehouses have created miniregions or complexes with branch managers reporting up to them. Increased supply of managers combined with the reduced number of branches means lower pay. A branch manager running an office of 100 brokers used to be sure to earn $1 million a year. Today, very few are earning that much, and those who are may be running complexes of 250 advisors or more.
All of the managers I spoke with know colleagues who lost their jobs, or were demoted, due to politics or consolidation.
In the past, firms offered a clear career path. When a large wirehouse branch would open, senior management could choose from many candidates aspiring to move up. Once the position was filled, usually by a manager from a smaller branch, the movement would create a daisy chain of mobility whereby a manager waiting on the bench would get his first opportunity.
Smaller branches used to be a great training ground for career managers. Now, these branches are rare and usually run by producing managers who get 90% of their compensation from their books. One wirehouse manager, currently running a large office, says, Smaller offices required you to be your own operations manager, your own compliance manager, your own administrative leader. When I then had these people reporting to me [when I was running a larger branch], I better understood what they did.
Managers can name six or more unemployed former colleagues off the tip of their tongue. The career uncertainty has made it more difficult for big firms to fill their top jobs. Another wirehouse manager currently running a medium-sized office tells Most of the managers that I know, myself included, are unwilling to take a risk on a new market for only marginally more money. In my own office, I know where the problems are and I have a pipeline of recruits. Starting over in a new city is too risky when [senior management] wont give me a long- term commitment.
Also, fewer decisions are being made at the branch level. One regional firm manager who used to be at a wirehouse tells me: I didnt get into branch management to approve emails and trade blotters. I got into it to coach, recruit and run a business. At my old firm, they only get to do one of those things now.
A current wirehouse manager says, I believe that 15 years ago, I had the best job on the planet. I was making a difference. The business was entirely about the client and the advisor. Decisions to hire and fire trainees are made outside the branch. Managers have very little discretionary income for branch specific marketing or to give incremental dollars to producers in their practices. Managers are still judged by the way they grow the business, but those ways are limited. With less time available to be spent with existing practices (i.e. increasing same-store sales), and training decisions taken away from the branches, growth is really just another word for recruiting.
Another change is there are more advisors per manager; which makes it tougher for a manager to have the same impact on an advisors business. If the most talented managers now have responsibility for over 200 advisors, how can they truly have an impact on those individual practices? A frustrated wirehouse manager says, For real business planning and coaching, I only have time for a handful of teams. Its frustrating for me, and its made those that I dont have time for more cynical and disconnected.
RECRUIT OR DIE
In addition, just as academics must publish or perish, branch managers must hire or be fired. Advisors are older and retiring much faster than revamped training programs are replacing them. Therefore, in order to keep a branchs metrics, like net new assets, positive, a manager must recruit. The medium-sized office manager added, The pressure to bring people is always there. When you do successfully recruit, instead of enjoying it, you are always wondering who is next. This recruiting pressure is also causing numerous disputes amongst colleagues at the same firm who compete for the same candidates because of overlapping geography.
What does this mean to the industry? Smaller firms are attracting top wirehouse management talent, who are in turn attracting wirehouse advisors.
In the past, top wirehouse managers were rarely seen at regional firms and certainly not at startups. All of the above factors have changed this. Regional firms are still giving their managers the freedom to coach, run a business and recruit, giving ex-managers the control they had in the old days which attracted them to management in the first place.
Another regional firm manager told me: At my old firm, they only get to do one of those things now.
New firms that are fueled by wirehouse management refugees include: HighTower, Steward Partners, Benjamin Edwards, Dynasty, Cantor Fitzgerald, Snowden and Fieldpoint Private.
With more management turnover, advisor loyalty is fraying. Advisors are more cynical about their branch leaders than ever before. Ive had 18 managers in my 30 years, one veteran advisor says. The best ones are honest and can advocate for me. But I just dont expect them to be here very long.
In addition, fewer advisors want to be managers. Advisors who historically would be attracted to a management career see the pitfalls and are more reluctant than ever to give up their book. The results: Big firms will have fewer leaders at all levels who have ever been advisors. Many advisors believe important decisions made by leaders who never walked in their shoes are usually mistakes.
SMALLER IS BETTER
Industry surveys show advisors are happier at the smaller firms than ever before and much happier than they are at wirehouses. At smaller firms, not only does a branch manager have more time to spend with his existing advisors, but those same advisors came to have significant relationships with senior leadership and other home-office employees who can impact their practices. Indeed, attrition within the smaller firms has never been lower, even with the wirehouse enticements of giant up-front money.
At every major firm, there are still some managers that are passionate about what they do, even with the industrys changes and challenges. Their commitment to making advisors lives easier, helping practices grow, and recruiting talented people and retaining their own proves that skilled big firm and big office leadership is still possible.
The large office wirehouse manager was the most optimistic. I still think this job is fun, he says. I have meaningful conversations with talented advisors every day, inside my office and outside the firm. Theres nothing else that Id rather be doing.