Advisors considering a move in the fourth quarter may want to take stock as the end of the year approaches.

If you take only one message from a rather tumultuous 2015, you might want to consider this: Build your practice with a firm where retail wealth management is a core business.

Just look at the boutique operations run by global banks.

Earlier this year, Barclays sold off its U.S. wealth management unit, with around 180 advisors and $56 billion in AUM, to Stifel Financial Corp. Now Deutsche Bank is reportedly planning a sale of its U.S. private-client brokerage, and Raymond James is said to be in talks to buy the business. And speculation is growing that Credit Suisse may jettison its U.S.-based private bank, which has more than 350 advisors managing $115 billion AUM. Meanwhile, Swiss regulators are tightening the screws by boosting net capital requirements.

If you are an advisor who has an out-of-the box business model that requires a high-end boutique firm, be prepared to accept the risks that go along with that decision. A firm whose private-client group is merely an adjunct to key business units may not devote the necessary resources to its private-client group, and could shutter it when times get tough.


Both Deutsche Bank and Credit Suisse have had run-ins with regulators and have paid hefty fines, similar to what Barclays experienced before launching a review of its business and choosing to raise capital and limit its downside risk by getting rid of its non-core wealth management business.

Does anyone wonder if the wirehouses will abandon their private client businesses? Not within my circles.

This underscores how important it is for advisors to choose firms in which retail is a core business. One way is to follow the money. Advisors can easily scrutinize research analyst reports or annual reports to determine the percentage of firm revenues that come from retail. 

Successful players in the wealth management arena are continually upgrading their platforms and technology. They are committed to winning the battle to attract and retain advisor talent. Unless an advisor can see hard evidence that a prospective firm is spending money and dedicating resources to improving its platform and technology, they should think twice about signing on.

Firms that are laggards eventually lose more advisors than they attract. Their declining revenues can set off a vicious cycle in which parent companies have even less profits to pour back in these businesses, causing firms to fall even farther behind their peers.

Now, many advisors really like working for the global banks. They value the combination of a high-end brand name and ease of access to product specialists, investment bankers and senior management.  These banks have excellent institutional trading desks and offer access to syndicate deals.


But several firms have experienced a reversal of fortune in recent years, as advisors have generally shunned them in favor of major domestic wirehouses, and regional and independent firms. Wirehouse advisors who've interviewed at the smaller boutique firms run by global banks typically are underwhelmed by their technology.

That's because those firms averaging only 250 to 350 brokers lack the critical mass to justify major expenditures in technology.  In fact, most of the advisors leaving Barclays have not joined other rival boutiques. Merrill Lynch grabbed the lion's share of departing Barclays advisors, and JP Morgan and Morgan Stanley scored some impressive hires.

UBS may be the one exception that doesn't share the downside risk of the other global banks. That's because the firm's nearly 7,000 broker sales force is a scalable business, and one that justifies major expenditures on platform and technology. It's also too big to sell.

In contrast to other banks, advisors recognize this, and UBS has continued to snag large producers from the competition.  Also, many advisors still regard UBS as Paine Webber, the storied brokerage that was absorbed by the Swiss-owned bank, and which made wealth management its core business, a proven formula that remains relevant to this day.

Being a financial advisor is a rewarding but oftentimes stressful business. It's a big responsibility to manage client portfolios, especially during the volatile markets that we've seen of late. That's why advisors should choose to affiliate with firms that are firmly planted in the retail business.

The last thing they need is the added angst of wondering if their firm is committed to providing them with the tools they need to be successful.

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