I was listening to a news station recently and the business segment gave the top three reasons why executives leave their jobs for greener pastures. They are certainly applicable to the Retail Brokerage World:
1. Problems with their immediate boss
Though this one is still true in the retail brokerage world, I think it has been less important in recent years based on the larger global problems. As things have calmed down more recently, however, it has become a bigger issue again. The Wirehouses have seen Branch Manager compensation as a big expense to be cut in an attempt to bring their margins back up as revenue has shrunk. To that end, fewer managers have more Advisors reporting to them. Since all of the firms have done this simultaneously, the Street has become “long” Branch Managers. Oversupply and reduced demand equals lower compensation. But to the Advisor in a branch, it means reduced service, a slower response time to get problems solved and less flexibility at the point of sale. More Advisors than ever are seeking out firms where Branch Managers have a smaller footprint (i.e. smaller firms usually) or are exploring ways that they can manage themselves (i.e. independence).
2. Toxic culture at the old firm.
The turmoil in the industry has forced mega-mergers on the three biggest brokerage firms (Merrill, Wachovia, MSSB) and a total makeover in senior management at the fourth (UBS). If these mega-mergers were books, we would only be in the first 100 pages or so. I certainly don't pretend to have a crystal ball about how these books will end. That said, MSSB clearly has the biggest challenges ahead in culture change because they are attempting to merge two giant firms that do the same thing, (Morgan Stanley/Smith Barney) as opposed to just being taken over by a larger institution (e.g.: Bank of America-Merrill and Wells-Wachovia). I believe that the perceived insensitivity to the Advisor population by senior management gives MSSB institutional risk. Within certain branches, Advisors are describing a “poisonous” culture, a “tough place to work”, a feeling of helplessness about their local situation, and a lack of trust that their firm has the leadership and the vision to improve.
3. Lack of a definitive track for career advancement.
Advisors do not move out of their career track very often; the best of them stay Advisors because they love the entrepreneurialism inherent in the role and the ability to help clients achieve their financial goals. The stagnant markets have led to stagnant production. For Advisors, career advancement is the feeling that they have prospects for growth. If they do not have it where they are, then they will either go someplace that will give them a check so that they have money in their pockets, or a way to tie into a stream of leads and referrals so that they know they have a chance to grow.
I believe that here lies the key to the best firms “winning”, the key to those aforementioned books having a triumphant ending. The best firms, big and small, will have a vision to make Advisors better at what they do, and an ability to deliver on that vision, so that they will continue to not just compete, but thrive in a very challenging regulatory and investing environment.
