Stewart Lee, a former branch office manager who heads Wellston, Okla.-based Lee Training — a consulting and practice management firm which helps develop SIFMA's Branch Manager Development Program — says that when he was a branch manager in the 1970s and 1980s, the job was completely different. Back then, for many financial advisors, graduating to the position of branch office manager was the ultimate aspiration. It was an honor typically bestowed on you by higher-ups at your firm who felt you should be leading the troops by your stellar example. With the job came a generous salary and some potentially ample production bonuses. And, with it also frequently came the respect and admiration of the brokers who worked for you.
Things have changed. For years, the job of a branch office manager has been getting tougher, and less rewarding, as managers have become more beholden to compliance departments and have less time to mentor and coach the troops. Indeed, it has never been more difficult than now, say veteran managers. At least in the wirehouse world, morale is low among the advisors who branch managers are meant to support, while jobs are becoming scarcer and pay is falling.
Because branch managers often act as liaisons between financial advisors and company management, these days BOMs are finding themselves having to defend firms with damaged brand names. “Today's branch manager has to represent the broker/dealer to his advisors at a time when many of them feel truly let down by their firms,” a wirehouse BOM in the northeast says. “And, the public basically hates this industry right now, which isn't exactly great for morale.”
On top of that, despite a recent rebound in the market, stock option values remain depressed, and many firms have recently merged with others, stimulating continuing confusion and discomfort. The mergers and acquisitions and a trend toward cost cutting have also resulted in fewer branch office manager jobs. Particularly vulnerable are those managers who've given up their books of business. This includes most of the managers working at the wirehouse firms, where greater management responsibilities and a heavy compliance workload make tending to clients virtually impossible. For many of these managers, job security is almost non-existent.
Rick Peterson, who heads Houston-based industry consulting firm Rick Peterson Associates, estimates that one or two traditional branch managers are let go every week. And while Peterson doesn't have any hard data, he says there are probably about 3,000 traditional branch managers left in the industry today, down substantially from even six months ago. “We've never seen anything like this in the industry,” he says. The positions get re-filled if they're in strategically important areas, he says. But, in the aggregate, “The only areas of real growth are with regional firms, and then primarily for producing managers.”
Branch office manager pay is way down, too. One New York BOM says that, ten years ago, he was earning four percent of his branch's top-line revenue. Today, that number is one-half of one percent. “Office and firm profits have been dramatically reduced,” Peterson says, “which has translated into a drastic reduction in branch manager compensation.”
That's because branch office managers are expensive, says one NY-based BOM: “A typical wirehouse BOM makes more money than the rest of his staff combined, at a time when firms are desperate to cut overhead — managers and mortar.”
Recruiting
There is one bright spot for BOMs in all of this: retention and recruiting. Firms that have gone through recent mergers and acquisitions rely heavily on their branch office managers to keep acquired advisors — and their clients — on board. This is especially true in an environment where so many advisors are readily accepting sign-on bonuses to join other firms in order to compensate for losses on stock options. Good branch managers try to build personal relationships with their producers and those bonds can often help prevent advisors from jumping ship. “Therefore, as mergers occur, branch managers are key,” says Andre Cappon, president of Manhattan-based The CBM Group, an industry research and consulting firm. “The acquirer — or dominant firm — must gain the loyalty of the BOMs of the target firm, in order to retain as many producers as possible,” he says.
“Mergers demand that BOMs become better leaders and managers,” Cappon says. “They will have to retain confirmed or promising producers and cull the weak ones. But, firms must empower their BOMs — give them all of the support and tools they need to succeed at this challenging task.“
Lee says he thinks the outlook for managers will improve. “Things seem pretty bad for branch managers right now,” he says. “But I believe that, in the next 6 to 12 months, we'll have a clearer, more defined industry environment, and the best will survive — and even be rewarded. I still believe there's a place for talented managers to motivate, lead, mentor and direct advisors in helping investors to recover from what's transpired over the last 6 to 12 months.”
Meanwhile, for managers at regional and independent broker/dealers and RIA firms, the recruiting opportunities are strong. Almost across the board, these firms have been hiring away from Wall Street's biggest firms. D.J. Totland, branch director at RBC Wealth Management's office in Shrewsbury, NJ — part of the Florham Park complex — says that, in today's treacherous market, the firm is far exceeding its recruiting goals. “And, we're being very selective,” he says. “In the first few months of 2009, our firm met two-thirds of our recruitment goal for the entire year.”
Many seasoned wirehouse brokers are tiring of the woes of the bulge bracket world, he says. “We find many are eager for a change to a firm like RBC,” which calls itself a national boutique firm, Totland says. “We can offer them a solid parent, a solid platform and a stable culture.”
Totland, a former Smith Barney sales manager, says that being with a smaller firm also means fewer redundant offices. “Right now, there are three Smith Barney offices within three miles of each other. With constant restructuring, that could mean there'll be three managers ultimately vying for one position.”
“A number of boutique and independent firms are growing,” he continues. “From RBC and Janney to Raymond James and LPL. The problem is, though, that these firms aren't expanding at anywhere near the rate that the larger firms are shrinking.”