Reinventing the Branch Manager

The branch office manager of yore is dying.

The do-it-all BOM — the guy who would mentor an office's young bucks, auditing their tickets and their client interactions all while recruiting and tending his own book — is becoming obsolete in today's compliance-happy environment.

Compliance burdens have brought to the fore an issue that has lain dormant for many years, namely that the branch office manager job has long been an ill-defined catchall. A BOM was a top producer, a sales-team captain, a human resources manager and a company executive. Even prior to the recent explosion of reporting and supervisory requirements, relatively few managers were able to effectively balance the demands of supervision and producing. If a manager was producing at a huge clip, chances are he was not supervising his brokers all that well; if he paid extra attention to administrative and supervisory matters, chances are his production suffered.

“These guys have long been expected to be Renaissance men, and that's not fair,” says André Cappon, president and founding partner of the CBM Group, a New York-based consulting firm.

The Professionalization of the BOM

There's little question the BOM position has entered new territory in the last few years. In addition to the increase in compliance-related work, product offerings are growing more numerous and more complex, and the number of branch offices in need of supervision is rising (by 16 percent since 2001 to 102,103 in May 2005, according to the NASD).

Broker/dealers' responses to these developments have been fitful. Partly, that's because BOMs have cut such a large profile in the industry and changing their role could mean taking the retail model in a new direction.

Nonetheless, a distinct trend of “professionalizing” the BOM position is emerging. The most obvious sign of this is a splitting-in-two of the traditional BOM roles. One role is a salaried administrative position geared almost exclusively towards compliance matters and paperwork. The other resembles the BOM position of old, with responsibilities for mentoring, recruiting and the profitability of the branch.

This trend is a nascent one, and statistics about it are hard to come by. For instance, neither the SEC nor NASD tracks the BOM population, much less demographic subtrends in the profession. Still, one piece of statistical evidence of the bifurcation of the BOM job is evident in the Registered Rep. survey of branch office managers, which showed that 61.9 percent of BOMs continue to produce. This number is “low, historically speaking,” down from the 80-percent zone a few years ago, according to Stewart Lee, chairman and CEO of Lee Training in Wellston, Okla. He says the drop in producing managers is a sign that more are being channeled into the administrative positions.

“In the past, the branch manager was a big-time producer and a role model — a guy who could put his arm around you and help you mature because he'd been there himself,” says Lee, whose firm conducts thrice-yearly BOM training seminars for the Securities Industry Association. On at least one level, a drop in the number of producing managers is a negative development for the average rep and for clients, he says. “What suffers is that advisors don't service clients as effectively as they could, and as a result, the penetration into their accounts won't be where it could be.”

Adds Cappon, “When you lose the mentor, you lose some of the soul of the industry.”

The Art of the Split

A number of firms agree with this assessment and are taking steps to ensure mentor-types can survive the necessary evolution of the BOM position. For instance, Wachovia Securities launched its “Next Generation Branch” initiative at the beginning of this year, with the specific goal of freeing up branch managers to interact with the brokers in their care.

The model for this initiative is Wachovia's Dallas complex. Eighteen months ago, Wachovia's Dallas area offices, like many in the industry, were drowning in compliance-related paperwork. With BOMs barely able to fulfill their responsibilities, the complex's manager, Leon “Trip” Bomar, III, decided that something had to give.

“The business had become so complicated,” he says. “One person can't do the [BOM] job effectively as a generalist. There needed to be multiple specialists.”

This year's branch office manager survey attests to this complexity. Though stocks and mutual funds still account for about half of the production at the respondents' branches, stocks rated only a 5.8 (on a scale of 10) in terms of importance in the coming three years. Managed accounts (7.9), mutual fund wrap accounts (7.3), variable annuities (6.0) and life insurance (6.0) are all expected to outstrip that. Of course, this is in addition to the coming avalanche of disclosure and reporting documents that accompany the current “bull market in regulation” as one industry executive puts it.

Bomar's solution was simple: to centralize the BOM operations and administrative tasks. He broke these into five categories — an operations manager to handle tickets and other paperwork; a compliance manager who “ensures the client's interest comes first;” a human resources manager for handling issues related to privacy and identity theft; a productivity manager to help brokers “ensure client satisfaction;” and a resident manager, a generalist who handles traditional BOM duties, including mentoring.

“This doesn't take away the accountability of the manager in the branch — he's still responsible for what goes on there,” says Wachovia spokesman Tony Mattera. “It just reduces the time spent on administrative tasks,” which in turn enables him to focus on important matters like recruiting and helping the branch's reps maximize their earnings.

Merrill Lynch has a similar arrangement in its six-branch complex in Maryland. Greg Franks, who manages the 141-advisor complex, has five producing branch managers under him, but does not produce himself, the better to manage the offices. His complex also has a compliance manager, an operations manager, a second administrative manager and a service manager.

“Within the last six or seven years, the emphasis [on compliance] has doubled or more,” says Franks. “It does cut into your ability to be a leader.”

Franks says he meets with his compliance manager the first thing each morning, and converses with him another four or five times every day. “It's his job, but my responsibility,” Franks notes.

What About the Rest of Us?

Of course, having branch managers devoted to specific administrative tasks means increasing overhead, and this requires a certain amount of scale — scale the vast majority of firms do not possess.

Separating out the BOMs' administrative functions “works within the big firms because they've evolved into a different kind of animal,” says Cappon. But if you've got a branch with brokers producing less than $400,000 and fewer than 50 people, you probably can't afford dedicated administrative staff.

But that doesn't mean the BOMs at the larger firms have it free and easy. The centralized administrative offices do not come cheap. They are full of employees whose salaries are new costs, plain and simple. These costs have to be offset by something, and usually that something is higher production from the branches.

“Firms are saying, ‘I'll deal with these costs, front-loaded, but your branch is going to have to be more productive,’” says Lee.

Even within firms like Merrill, BOMs who manage smaller numbers of advisors than Franks are unlikely to get anywhere near his level of administrative support. BOMs at most regional and independent firms are in the same boat — but their situation is made even more stressful by the fact that small offices often can not continue to operate without a producing manager, so retreating into an administrative position is not an option.

Given that there are more branches than ever, and fewer reps per branch every year (according to the NASD), it stands to reason that dealing with these compliance issues is going to be an ongoing problem for the majority of the industry.

One way to cope with the administrative burdens is to lean more heavily on sales assistants. According to Rep.'s annual survey of sales assistants (see Registered Rep., October 2004), the vast majority has their Series 7 certifications, which testifies perhaps to a growing level of untapped sophistication.

“You could have a registered person working with the manager to handle 70, 80 even 90 percent of paperwork,” says Lee. “And when those people aren't flagging important compliance items for the manager, guess what — they can handle some orders.”

There are two problems with this solution. The first is that sales assistants already consider themselves overworked and underpaid, and thus are probably not the right people to hand such an important job. Second, the regulators are not in love with the idea.

“Independence is a very important issue when it comes to compliance oversight,” says an SEC official. “It probably wouldn't work to have a person whose salary or bonus is under an advisor's control to be placed in a position of having to check up on him.”

Another solution to the problem is deploying software systems that can reduce a manager's work by analyzing trade tickets and flagging potentially troublesome ones. That's precisely what Lon Dolber, president of American Portfolios on Long Island, N.Y., has created to monitor his roughly 400 independent contractor reps. “It's compliance by exclusion, a funny trade will get set aside in an exception report,” says Dolber, who has about 95 registered principals, Series 24 or 26 holders, to supervise the reps in the field. The principal then examines the trades online and can see details, including clients' risk tolerances and investment objectives. “Technology doesn't replace a person, but it helps,” Dolber says.

“For most offices, the compliance job will have to be solved with technology,” says Cappon. “If a BOM has to look at every order, he won't have time for anything else.”

Who Wants This Job?

If all this makes the BOM job sound unattractive, experts say, that's because it is unattractive right now — so much so that some firms are starting to have trouble finding qualified people to fill their BOM positions.

“I have clients who are turning down promotions because they're afraid they'll lose money in the deal,” says Bill Singer, a Rep. columnist and a partner at the New York-based securities law firm Gusrae Kaplan & Bruno.

A former BOM who is familiar with various wirehouse manager-training programs says the firms used to be swamped with sales assistants looking to step up to a BOM job. These days, demand has slowed to a trickle.

“You might as well shut those places down,” he says.

Exacerbating the problem are the increased costs associated with compliance, which are encouraging firms to cut some corners on BOM compensation. This generally translates into hiring less experienced managers, which, of course, is the opposite of what the industry needs right now, given the rising complexity of the job.

“The managers have been getting younger and younger — the trend has been to capture people earlier in their professional development before they make so much money that you can't pay them,” says Lee. “These guys are often supervising producers who are much older and much more experienced, and that's not a recipe for success.”

This is not to say that no one wants the BOM positions. For many, the job is a calling, not unlike teaching, that confers on the jobholder a certain amount of respect. It also offers an unparalleled opportunity to have a say in the way the industry operates.

“The branch manager job in the 1980s — this was something people aspired to, a real accomplishment,” says a former Merrill BOM, noting that some of that feeling remains today.

Indeed, even with all the compliance burdens, the BOM position continues to be one that attracts leaders and those with the desire will find a way to deal with the distractions.

“The people who will do well are those who continue to excel in leadership dimension but have the ability to add the dimension of manager/administrator,” says Franks. “The responsibility has been elevated significantly. I like it. I think it's terrific.”

About These Tables

The data in the charts accompanying this article are drawn from Registered Rep.'s first annual survey of branch office managers.

Name: Jack Gary

Age: 64

Firm: Raymond James Associates

Location: West Palm Beach, Fla.

Years as a BOM: 35

Branch AUM: $1.2 billion

Guiding Principle: “Select good people and treat them as if they were clients.”

Jack Gary knows what it takes to be a good manager. And he should — he's been at it for 35 years.

Gary signed on to be a branch manager after just a three-year stint as a broker. His career took him from a small b/d to a 16-year stint at Paine Webber before landing him in an Raymond James Associates office in West Palm Beach 10 years ago.

Today, Gary's a producing manager with his own $65 million book of high-net-worth clients, supervising one of RJA's largest branches, with 22 brokers and $1.2 billion in assets under management.

Gary says he's tried to follow the same management tenets over his entire career — hire good folks, support them, be a sales leader and be diligent with compliance. He says the first and last of those items go hand in hand and not surprisingly have become paramount concerns. “You help lessen the compliance worry by hiring high-quality reps,” he says. As for the mountains of compliance paperwork, Gary says: “You get good help.”

That help is an administrative assistant of more than 20 years, Karen Rosenthal, and his assistant manager, Jeff Sellers, a broker with 15 years experience. “Karen handles a lot of the compliance legwork,” he says. She reviews rep correspondence and consolidates monthly account activity numbers for Gary's final look-through, while Sellers is Gary's right-hand man for training up n' comers in the branch. “Since the manager is ultimately responsible, trust in the people around you is of utmost importance.”
— John Churchill

Patrick Sullivan

Firm: Morristown Financial Group, LPL

Age: 43

Location: Morristown, N.J.

Years as an OSJ: 8

Branch AUM: $750 million

Guiding Principle: “If you're not growing, you're shrinking.”

Increasing regulatory burdens have forced many branch managers into abandoning their own books and spending less time with the advisors. Not so for Pat Sullivan.

“I left the corporate world because I felt like it owned me,” says the 43-year-old registered principal in Morristown Financial Group. As compliance responsibilities grew, Sullivan and the firm's other founding partners, John Hyland and Robert Duffy, hired a full-time nonproducing compliance officer.

That officer, Bob Koster, has freed Sullivan, a Certified Financial Planner, to conduct estate and financial planning seminars, and to schedule regular meetings with his 200 retiree clients. It also has allowed him to play mentor to the firm's 20 advisors, though Sullivan admits that his role is often more one of peer than mentor. “Nearly everyone here has at least five years of experience,” he notes.

By all accounts, the advisors at MFG are a tight and diverse bunch. Hyland agrees: “Culture is a huge part of our story.” So far, the approach is working: With $750 million in client assets, MFG is LPL's No. 1 producing branch year to date.
— John Churchill

Name: Greg Franks

Firm: Merrill Lynch

Location: Baltimore, Maryland

Age: 46

Years as BOM: 22

Producing: No

Branch AUM: $10.8 billion

Guiding Principal: Everyone knows what a great leader stands for.

Greg Franks has stolen an adage from academia for his approach to branch office management: publish or perish, he says. Franks, who manages six offices in Maryland and 141 financial advisors for Merrill Lynch, puts all of his branch complex's rules and guidelines — everything from how accounts are distributed to how an advisor can get a private office — in writing every six months and sends it around. “What everyone wants from their leader is consistency,” he says.

Another crucial part of being a good leader, Franks adds, is to continually articulate to advisors his view of the industry and where it's headed. “I don't want them to react; I want them to position themselves to succeed.” Culture is also crucial. He cultivates an atmosphere of respect, and treats people “fairly, but unequal,” according to their needs and abilities.

The 46-year-old Franks gave up his book in 1986 to manage a branch, because he wanted a bigger challenge, he says. And he's never looked back. His job has gotten tougher over the years. Whereas being a good salesman used to cut it, now he has to be both a leader and a good business operator: He's held accountable for his offices' P&L statements — oh, and for all legal matters, too. Because of the size of his branch complex, he has three administrative managers and a service manager to help him out, which gives him time to spend on the people side of the business. “That's my true love,” he says.

Franks' approach has certainly reaped rewards. During his ten years in Baltimore, the revenue from his branch complex has almost quadrupled. His office won the National Quality Service Award from Merrill Lynch each year from 1999 through 2002 and then again in 2004. He has also been awarded the National Manager's Recognition Award — given to just 20 managers at Merrill — for six of the past eight years. Greg Franks says everyone knows what a great leader stands for, and from the sound of it, Greg Franks stands for winner.
— Kristen French

Methodology: On March 30, 2005 Registered Rep. invited 7,970 subscribers to participate in this online survey. These subscribers had identified their job function as either “branch management” or “senior management.” This mailing resulted in 412 completed surveys and 185 partially completed surveys, which translates into a response rate of 6.1 percent.