The advisers of the First Republic breathed a sigh of relief. America’s Biggest Bank Buys Struggling Employer Following last month’s banking crisis.
But advisers face many risks, even as CEO, under new owner JPMorgan Chase. Jamie Dimon Promises Stability, Big Cash, And An Attractive Brand Name.
Dimon encourages new advisers to stay instead of working for competitors, but many are still hesitant about staying, according to industry consultants and recruiters familiar with the advisors.Some advisers have already moved to other firms in recent weeks, moving between news agencies. UBS, etc. or famous boutiques or local businesses Like William Blair and RBC Wealth Management,In some cases Even if you are a registered investment adviser.
All advisors will consider changing employers at some point in their professional lives, but First Republic’s concentration of good advisors and how much risk their careers are at stake. It is unique in that it is
San Francisco-based First Republic, widely regarded as an elite billionaire before it went bankrupt and was acquired by JPMorgan Chase last month, had several ultra-high net worth advisors hired by news agencies several years ago. pulled out. This leaves the First Republic with a “to move or not to move”. This book is very informative for wealth advisors as it details the many factors that can influence your decision to join a competitor.
Several industry experts spoke to Financial Planning about the pros and cons of a First Republic adviser staying at JPMorgan Advisors. They said that while staying with the Wall Street giants mainly benefits convenience and stability, there can also be hidden costs to the carrier. Moreover, in their case, the ticking of the clock is loud.
read more: Former JP Morgan Advisor Leaves First Republic for UBS Amid Acquisition
“Timing is very important in making decisions,” said industry recruiter Roger Gershman, who said he has been in personal contact with nearly all of First Republic’s wealth advisors in recent weeks. Told.
Mr. Gershman, CEO of the Gershman Group, advised several First Republic advisers to leave the First Republic this spring. He said advisors are currently considered “free agents” and are highly desirable to competitors, but that could change as JPMorgan executes its integration plans, potentially making advisors said it could be difficult to quit easily.
Many of First Republic have already decided to dabble and withdraw. Ranks of “Wealth Manager” and “Wealth Advisor” On the website of the First Republic There were 229 financial advisors on Thursday, down to about 220 on Thursday. First Acquisition Date May 1st announced. Prior to that, the number was about 250 on April 24, when the bank announced it had lost about 10% of its wealth staff (advisors and support staff). This means that the former First Republic likely had between 250 and 300 advisers in early March, before the banking crisis began.
JPMorgan Chase & Co. declined to comment when asked about the matter. A spokeswoman for the bank confirmed the number of advisors as of May 1.
Broker protocol risk
A key potential issue that former First Republic advisers, now part of the JPM empire, need to consider is the possibility of JP Morgan removing them from the industry’s current protection. Agreement known as broker protocol. Under this agreement, member companies are permitted to allow departing advisors to carry with them some material pieces of client contact information, and companies operating under this agreement may not You agree not to pursue the Advisor or sue the Advisor.
Technically at the moment The First Republic is still an active member protocol. And part of the JP Morgan that these advisors participate in is the former Bear Stearns Securities Company, whose employees are also covered by this protection.
But that could change at any time, according to industry attorney Sharon Ashe. Chief Litigator at Hamburger Law Firm. And the Advisors of the First Republic need to clarify their current position on the Protocol.
“First Republic is a company with qualified joiners,” Ashe said, adding that the term means not all of the company’s advisors are subject to its protection. “So you can’t say that blankets are universal. Everyone can use them.”
“I think that’s something these advisors need to be aware of. Where do they fit in? They shouldn’t make assumptions,” Ash added, noting that advisors’ friends and colleagues could easily fall under protection. Individuals who explained that being placed did not mean they were under their protection also qualify as such.
“This is the worst possible way for an advisor to plan a transition, because what your colleagues did may not necessarily apply to you.”
Jodi Papique, president of Cross Search, a recruiting firm in Encinitas, Calif., said in an interview that advisers should also review individual employment contracts to see what risks there are when leaving. Some advisors may decide that it is better for them to stay with First Republic for their own circumstances and for contractual reasons.
read more: RBC Acquires First Republic Advisor With Almost $1 Billion Under Management
“We don’t know what the individual teams or individual advisors are like, what their contracts are, and what kind of non-competitive conditions they are potentially in. It really determines how well it works,” Papique said.
“It always goes back to the individual contract, not just whether it is part of the broker protocol or not.”
Additionally, Ash said that protocol members are allowed to change their protection status with only 10 days’ notice, and that even if they notify other protocol members of the change, they are obligated to notify their own advisors when doing so. said no.in the case of Recent Silicon Valley Private Bank Advisors‘s new owners, First Citizens Bank, withdrew them from the protocol this spring, a lesson perhaps too late to learn.
Gershman said that could happen to any adviser at any company, but the risk of First Republic’s advisers making the wrong decision is greater if they leave JPMorgan. why?Because “JP Morgan has historically very protective and a lot of litigation“then come to the quitting advisor.
price of waiting
To make matters worse, it could become more difficult over time for former First Republic advisers to leave JPMorgan, just as many of their colleagues have recently retired, Gershman said. said. In these moves, the advisors were able to port over the entire customer book “within weeks” without opposition. Because former colleagues were preoccupied with thinking about their moves, JPMorgan didn’t have time to work on customer retention immediately after the acquisition. business.
“J.P. Morgan barely even consolidates, they’re starting to consolidate acquisitions, so it’s very difficult for anyone to go after them,” he said.
Wall Street banks are likely to introduce new custody agreements soon, which could include all sorts of golden handcuffs, Gershman said. That could mean deferring more rewards, “garden leaves” on withdrawal, or clauses that prohibit soliciting former clients.
read more: JP Morgan Launches Love Bomb Campaign To Keep First Republic Advisors
“Certainly, this clause makes it very difficult for them to say, ‘I’ve been at JP Morgan for five or seven years, and I’m going to take what I thought was my business to another company. Yes.” Gershman said it was likely.
“J.P. Morgan has the power to make that deal very tight, and they will probably use that power. Essentially, they bought the company and they bought the customer.”
But now, leaving advisors are being paid industry insurance premiums by new employers that are much higher than usual, Gershman said. Nearly all of them were in the range of 400% or more of their earnings in the last 12 months.
“Before this happened,[it]was traditionally always between 300 and 340, so that’s a pretty high percentage,” he said.
Gershman knows that because he often negotiated those deals himself. “There’s a lot to negotiate. When you’re talking about $10, $20, $50, $70 million packages at a minimum, they’re not small packages.”
But the longer it takes for an adviser to retire, the greater the risk of not being able to lead such deals, he said, and employers will find it harder to keep all their clients.
Phil Waxelbaum, founder and CEO of Masada Consulting and an industry recruiter, also agreed there would be minimal friction if advisers left now. “Nobody can match them now,” he said, referring to Morgan Stanley and RBC Wealth Management Known as two of the highest paid First Republic advisors.
read more: JPMorgan sees first republic deal ‘accelerating’ wealth management
Culture clashes in the Morgan family
On the other side, Significant friction can arise between Incoming First Republic Advisor and his new colleagues.
JPMorgan Chase’s private bank in particular has a reputation as a source of intense competition for attention and resources, and has even been at the center of lawsuits from JPM advisers who allege their clients have been poached, Gershman said. Private bankers are paid salaries and bonuses, he said, and they are often much cheaper than brokers on the JPM side, even though they do a lot of the same things.
“There really is a tug-of-war between brokerage firms and private banks,” said Mr. Gershman, citing a significant drop in the number of former Bear Stearns advisers since 2008.
“They left the company because they were treated as red-haired stepchildren of a private bank.”
Jennifer Piepzak, co-CEO of JPMorgan Chase’s consumer and community banking division, which includes JPMorgan Wealth Management, said at the company’s investor day on May 22 that the company simply He said he looks forward to learning from the First Republic rather than trying to impose its own culture. I joked to staff there that Wall Street banks were still serving the First Republic’s iconic cookie as a snack during breaks in the event.
With approximately “200 advisors and $200 billion in assets,” Piepzak said that many branches will continue to open in desirable asset markets. I have admired their culture and their service.” “This model complements ours, so we look forward to incorporating the best of First Republic into our franchise.”