Tags: recruiting

Looks like a lot of recruiters out there telling Securities America advisors to bolt now that Ameriprise has put the firm on the block. But where were they when the firm was fighting for its life?

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The recruiters say a move to a bigger broker-dealer -- LPL, for example -- makes sense because "there is safety in numbers."

That may be. We really have no idea where Securities America will end up or how smooth the transition will be.

However, while the Securities America reps I've been talking to are keeping their options open, they're not exactly fleeing the ship before it sinks.

For one thing, justifying a move as in clients' best interest at this point seems self-serving at best.

Are your clients really going to believe that you thought everything was fine a month ago -- when there was a non-trivial chance that the firm would be wound down instead of sold off in a single piece -- but now you're jumping in order to protect them?

For another, nobody wants to just jump randomly out of a risky environment if they have time to plan a place to jump to.

Simply heading to LPL because it's bigger -- even though it means the hassle of  changing platforms -- probably falls into the "jumping out" category.

Maybe bigger is better, but it's not all or nothing. There's a whole industry out there between LPL and the tiniest boutique shops, and every single firm has its own culture, drawbacks, and advantages. 

It takes time and -- ironically, given the problems that caused Securities America's problems in the first place -- due diligence to find the right fit. But if anyone runs to a big firm and then realizes a year or two from now that they made a bad choice, what will his or her clients think?

Tags: compensation | profitability

UBS is touting its Wealth Management Americas unit for doing a lot of heavy lifting in turning its results around. But its advisors have yet to reap richer rewards.

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The Swiss bank's U.S.-centered brokerage operation took in $4.1 billion in new client money last quarter and swung from a slight loss to a $127 million profit.

If that performance continues, the unit's roughly 6,800 advisors may see much better bonuses at the end of the year.

But until then, advisor compensation has been stuck in a bit of a rut.

Wealth Management Americas reported 6,867 advisors this time last year and paid them the equivalent of 510 million Swiss francs -- $583 million, or about $85,000 apiece on average.

In the recent quarter, the 6,811 advisors of record brought in 507 million Swiss francs, or $580 million. Even though the typical UBS advisor was managing an extra $600,000 in client funds, he or she only earned a grid payout of maybe $200 more last quarter on that extra AUM.

What's going on? All UBS says is "financial advisor compensation decreased 2%, but rose 2% in U.S. dollar terms due to higher revenue production," which seems to boil down to a smaller advisor pool making the firm more money, even though in the aggregate they got paid less.

For some reason, Wealth Management Americas is still only generating 78 basis points of revenue on client assets -- $7,800 per $1 million.

That's not horrible, but it lags the 95 basis points UBS is generating from its global wealth management operation or the 118 bp it can squeeze out of its Swiss customers. 

And while the firm doesn't break out its overseas compensation with the detail it lavishes on the U.S. unit, it seems that those advisors are managing much bigger books.

On average, the non-U.S. advisors are running $258 million apiece in client assets, versus $125 million on the Americas side.

Recruiting costs are down.

Now that Securities America has settled its private placement obligations, the next question is whether a much smaller firm in Colorado will survive the saga.

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CapWest Securities was linked with Securities America when the shadow of private placements fell a few years ago, but has been pushed from the headlines by its big counterpart's tribulations.

The Lakewood, Colorado firm sold $22 million worth of the same bad medical debt that hurt Securities America, along with plenty of untraded REITs. 

Now it is wrangling with its insurance company to cough up enough cash to pay its fines -- the same problem that killed QA3 a few months back -- and faces its share of lawsuits.

As it is, CapWest recently reported that it lost $108,000 in the fourth quarter, pushing its operating capital down to $80,000. 

While the company only needs $50,000 in capital to remain open, all it would take is another significant operating loss -- or a negative legal judgement -- to default on its reserve requirements under the Securities Act of 1934.

It's an open question whether CapWest's parent Capstone Financial Group can or will pump more money into the firm to keep it afloat, as Ameriprise helped settle Securities Americas' liabilities.

Meanwhile, CapWest's website seems to be down for repairs.

Tags: independent broker-dealers | LPL

LPL may do a victory lap this morning for reporting that it captured more advisors than anyone else and is already becoming one of the biggest RIA custodians.

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The company, which has evolved into the biggest independent broker-dealer out there, also boosted its earnings 92% on an annualized basis, but plenty of names in the business are hitting blow-out numbers like that this quarter.

But in terms of growth, LPL is leading the pack. Buried in the company's release -- and so missed by some reports -- is the tidbit that the 528 new advisors it added last quarter were "more ... than any other broker-dealer in the U.S."

On a percentage basis, that's maybe 4.4% net growth -- well ahead of the industry norm, where many firms have been struggling to simply keep from shrinking.

Retention is only a little better, so many of these advisors are simply being wooed from other independent broker-dealers or acquired in M&A.

LPL also wants the world to know that it's been building its RIA custody business to the point where it serves as custodian for about $15 billion and 115 RIA firms. 

That's double what the firm had on the RIA side last year, but still pretty far behind the real giants. 

However, CEO Mark Casady says the M&A will continue to boost his AUM across the business -- if he can find higher-quality targets than the "distressed" broker-dealers that are coming to him.

He wants to buy firms with established parent companies, which could make Securities America an interesting center of speculation down the road.