What is Your Biggest Challenge Operating at a Wirehouse?
Jeff Thomas | September 06 2019
What is your biggest challenge operating at a wirehouse?
- Changes in compensation?
- Insufficient staffing support?
- Firm culture?
If any of these make the top of your list, you are not alone. According to the “U.S. RIA Marketplace 2018” report by Cerulli, these are three of the top five complaints of wirehouse advisors.
They resonate with me, as well. Here are some of my stories about these challenges:
Changes in Compensation
When our team left Morgan Stanley in 2017, my published “grid” was 49.5% on well over $2mm of revenue. Even though I’m a numbers guy, I really didn’t want to do the math on the percentage I was actually taking home because I knew it would frustrate me. However, when I knew we were going to leave the firm, I did the math because I needed the information for budgeting purposes. I had an analyst, a junior financial advisor and two full-time sales assistants I paid out of my book. Any guesses at what my actual payout was?
Drum roll, please…32%! That is over 35% less than the published grid...and I still felt like I was wearing a lot of hats!
Every year, a new compensation plan rolled out. For years, I studied it in detail as soon as it was released. Eventually, I quit doing that. Every year they would change bonuses and deferred compensation structures to try and incentivize certain behaviors—like selling banking products. I finally just got to the point where I ignored all the details. My team had its’ way of doing things and we weren’t going to change our approach at the whim of managements’ annual carrots.
Insufficient Staffing Support
Everyone knows how important it is to have a great team. However, I always found building a great team very challenging at the wirehouse. There was often friction. Early in my career, I struggled to get a decent sales assistant that I could share. At the time when the business was growing the most, I had the fewest resources. I spent endless hours waiting outside the Branch Managers’ office to get paperwork signed. As the business grew, even when my production numbers justified the firm paying for an additional team member, I was frequently told the firm was on a hiring freeze. Toward the end of my time at Morgan Stanley, I was told that the hiring freeze was due to the fact that five international advisors had been hired and were way overstaffed, so my profits were making up for their losses! While I appreciated the honesty, it certainly didn’t help my business!
Once the green light was given for the hire, the struggles generally did not end. it was often difficult to source a qualified person due to the mission and vision of our team being different from that of the parent company. To make matters worse, in one case, the Complex Manager promised to pay the base salary for an additional sales assistant and then took her entire salary out of my paycheck. I voiced my concern, was told by the Complex Manager that the promise was never made, had the promise confirmed by the Branch Manager and left the firm before the issue was resolved. (I was going to leave anyway, but I took this as one last confirmation that it was time to go).
Ok, I need to take a deep breath and lower my heart rate after that last story. Breath….
I saved this topic for last, but to me this is the overarching issue about why advisors are unhappy at the wirehouse. I felt like we were able to get 50-60% of what we wanted to get done at the wirehouse. As I mentioned before, our team had a different vision, mission and values than the wirehouse. For instance, one of the values where we worked was “Putting Clients First”. That never resonated with me. Of course, an advisor should do that, right? However, apparently on a conflicted platform, that needed to be said.
Even though management always said we were all on the same team, the general feeling in the branch system was not that way. The chatter amongst the advisors was that management was run by a bunch of former McKinsey consulting partners who had never been advisors. The feeling was “us against them” and that lack of trust drove a belief that management’s goal was to slowly whittle away at the advisors’ pay.
I wrote in my two year anniversary blog for Archetype that the biggest surprise from leaving was the pure joy I feel in waking up every day to go into a business where there is no friction between the culture of the team and the parent company. In fact, that full alignment has not just given me 40-50% more joy, but is exponentially more joy!
Cerulli, U.S. RIA Marketplace 2018.
Jeff Thomas is the Founder/CEO of Archetype Wealth Partners. He has assembled an amazing team to provide an open architecture, fee-only (fiduciary) platform that offers a wide variety of investment choice to clients. Archetype exists to help families thrive across generations.
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