Connecticut native Jeffrey Korzenik thought he'd truly “made it” when, in 2001, at age 39, he was promoted to complex manager, overseeing Smith Barney branch offices in Danvers, Mass., and Portsmouth, NH, with a combined total of 55 reps and $19 million in production.
Korzenik had worked at Smith Barney and its predecessor firms for 15 years in roles ranging from advisor to researcher to product manager. But he'd always been interested in branch management, he says. “The role, at that time, was very clearly defined, and I was particularly drawn to the leadership aspect of it. I knew how critical managers were to both the growth of their advisors and their branches.” Plus, there was a lot of competition for branch management jobs back then. “When I got the position, I felt honored,” he says.
Within a few years, however, the industry began to change, and so, too, did the once-coveted role of branch manager. Regulators beefed up compliance requirements, and branch managers were spending more time mired in bureaucratic red tape than leading and coaching their reps. What's more rookie advisor survival rates began to plummet, and managers needed to spend much more time recruiting reps than training them. Further, a slew of corporate mergers and aggressive cost-cutting efforts led to massive consolidation and complexing among wirehouse branches, he says, leaving more than a few managers out of work. Rick Peterson, head of recruiting firm Rick Peterson & Associates, says that over the last five years, wirehouses have let nearly half of their branch managers go, or roughly 2,000 out of about 4,500.
So what kinds of alternatives are there for branch managers who don't like the turn their careers have taken? We decided to talk to a few former branch office managers who have landed in other jobs to find out how they got there and how they like their new digs.
Bank-based Wealth Management
Despite expanding his complex's earnings by about 25 percent relative to the market over five years, and receiving a very attractive compensation package, Korzenik wasn't happy. He turned down offers to manage other wirehouse branches, calling them, “bad jobs at good firms.” In 2005, he took a job as president of wealth management at Salem Five Cent Savings Bank, a community bank in Salem, Mass. In October of 2009, he moved up the banking ladder, becoming senior VP and director of portfolio management for the Chicago affiliate of Fifth Third Bank. He's now working on a national scale for a 150-year-old institution with a 100-year wealth management history and over $20 billion in investment assets — and he's not looking back.
In his current role as Director or Portfolio Manager for the Chicago Affiliate of Fifth Third, Korzenik manages seven portfolio managers, two associate portfolio managers, a small support staff, and $2 billion in assets.
“My job is to create a great portfolio management experience for our Private Bank clients,” Korzenik says. He helps portfolio managers uncover their clients' financial goals, and structure portfolios to meet them. He also works to improve their presentation skills and deepen their understanding of portfolio analytics. Not coincidentally, his current job entails much of what he loved about the early days of wirehouse branch management — in a different environment.
Korzenik actually developed an interest in bank-based wealth management while at Smith Barney, through a program where advisors could partner with local banks and offer a percentage of advisory fees for referring clients. “I saw that people have bank accounts and mortgages before they have significant investment assets for brokerage accounts,” Korzenik says. “And, lenders often help small business owners build their wealth. In the banking world, you have the first shot at managing people's wealth.”
What's more, improved technology and a shift toward fee and advisory-based business across the industry means you no longer need to be part of a huge institution that holds bond inventories or funds major sell-side research operations to compete, he says. “This has fueled the move to independent broker-dealers and RIAs, and it's helped traditional bank trust-based wealth managers, too.”
Korzenik sees many advantages to his current position. Fifth Third, he says, has “a tremendous base of wealthy clients, an open architecture which allows us to use outside money managers through both mutual funds and separately managed accounts.” It has a fiduciary responsibility to the client. As a salaried employee, Korzenik's income is steady — and, now that he works for a national institution, he says it's comparable to the earnings of a wirehouse branch manager. “But, given the outlook of that job, my earning potential now has to be much greater.”
The bottom line for Korzenik: “When you're at a wirehouse, you tend to have tunnel-vision, thinking these firms have a monopoly on the best investment pros. But, there are some great advisors at other investment platforms. Some of the finest I've worked with are in banks.”
Non-producing Branch Manager
With 27 years experience in the brokerage business, the last 18 of which he spent as a non-producing branch manager of Smith Barney and its predecessor firms' in the Garden City, NY branch, Glenn Fischer's experience typified what more than of few of his branch manager peers are facing. In January of 2009, despite running a successful branch that consistently ranked in the firm's top quintile, he was asked to step down and move back into production. Within a few months, he was replaced, he says, and soon thereafter, the office became part of a larger complex run by his former regional director. He chooses not to speculate why the change was made, and stresses he has no ill feelings for his now former firm.
The 58-year-old Fischer never doubted his management capabilities, or the notion that management was where he truly belonged. And so, in September, he moved on to become the CEO — and non-producing branch manager — of Garden City-based New York Wealth Management Group, an independent firm affiliated with Raymond James Financial Services. He has a staff of nine, three of whom are financial advisors who oversee a combined total of more than $200 million in assets for 300 clients. The firm's focus is on the ultra-high-net-worth market — clients with $5 million or more in investible assets. Fischer is back to coaching and recruiting — the things he loves best. Fischer believed that, if he could find a platform that offered the kind of high quality products and services typically found at the wirehouses — with a flexible enough business model that would let him put advisors and clients first and avoid a lot of time-consuming red tape, he'd have a successful and enjoyable management experience once again. He feels he's found it at RJFS.
Fischer feels the hybrid model provides all the benefits of a full-service firm (state-of-the-art office, plenty of sales assistants, coaching, training, and full medical benefits) combined with the perks of the indie business model (higher payouts, equity ownership, and the ability to get things done quickly and efficiently). And, many of the challenges typically facing independents, like office rentals, technology issues, and insurance, are covered by hybrid models like his, he says. “I believe this is what's been missing in the industry, and is the model of the future.”
While he put up 100 percent of the start-up costs, he's only keeping a 65 percent ownership stake. “I want to give a piece of the business to my advisors, based on their production,” Fischer says. He admits his earnings have taken a ‘hit’ as he's gone independent, “but I consider it only for the short run. This time next year, I expect to have 20 advisors, and I expect this office will be full within 2 years with prudently selected FAs, based on the interest we've seen in our business, and the desirability of this new model. When we fill this office, I plan to open another.”
Keep Your Book And Buck The Odds
A 27-year industry veteran, Pat Mendenhall spent 19 years at the top of the wirehouse branch management game. In 1990, he became a producing sales manager for then PaineWebber in the downtown Houston area. By 1994, the firm gave him his own downtown branch — with 35 reps and $6 million in production to manage. In 1997, he combined the firm's two downtown Houston branches, and revenues soared to $30 million. Two years later, the complex had a rep force of 120 and total revenues exceeding $65 million, making it one of firm's the top 3, and number one in Texas.
Despite such enviable success, hefty seven-figure earnings, and the fact that compensation on his book of clients had been capped years earlier, Mendenhall always kept his book of clients. He enlisted partners to help manage the $400 million-plus in assets he'd developed throughout his career, and oversaw an additional $100 million himself from 12 client relationships. “To me, production is any branch manager's first line of defense. If your compensation is capped, get partners to help you. All of the revenues go to your branch's bottom line. Establish succession plans, should anyone decide to leave.”
Like most of his peers, he grew increasingly frustrated with the changing role of the branch office manager. “In the early days, as long as I ran a clean and profitable business and grew my market share, I could do pretty much what I wanted,” he says. “By 2005, I was running one of the largest complexes at UBS, but, since the wirehouses had centralized so much of their operations, I felt like I couldn't get much done — or have much of an impact on my advisors, their clients, or their careers.”
“Expenses, pricing of products and services and compliance were centralized with little regard for what the branch, advisors or clients were seeking,” he explains. Much of the branch manager's power was being taken away. “I used to be able to help brokers attract large clients by helping negotiate fees and interest rates. Now, firms can come in and randomly raise them. We used to be able to price things competitively enough to gain new business; now, the various products and services departments set the prices.”
Compensation schemes also surfaced at the wirehouses that aimed to cut managers' income, he says. “After the dislocation of the markets in 2008, firms began facing inward, instead of outward toward their clients. As the front line to advisors and their clients, branch managers were losing the ability to deliver results.”
Like many wirehouse branch managers, Mendenhall became disgruntled. But, unlike most, his ability to invest his earnings prudently provided him with more outside income than his management job. So, in August 2009, he stepped down. While the 50-year-old can afford to retire, he's far from ready to do so. “I'm taking my time to study the market, speak to advisors about what they'd like to see, and weigh my career options.”
His advice to other managers: “Keep producing and practicing what you preach. If you run your own business and invest your personal earnings wisely, you can control your own destiny.”
“If I could tell every stand-alone branch manager at every firm in the U.S. one thing, it would be keep — or build — a book,” Peterson concurs. It's your best recourse in this changing industry; your best protection against your firm. If you can get management compensation while you build a book, that's great. Time management can be challenging. But, in the end, good producers are never fired.”
