Wirehouses have gone through unprecedented

change, and advisors who never considered

leaving are weighing all their options.

The LUre of Independence

onwallstreet •

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9, N

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• July

20

09

G

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Volume 19, No. 7 • July 2009 www.onwallstreet.com

Wirehouses have gone through unprecedented

change, and advisors who never considered

leaving are weighing all their options.

The LUre of Independence

onwallstreet •

Vo

lum

e 1

9, N

o. 7

• July

20

09

G

oin

g In

de

pe

nd

en

t

IndependenceWirehouses have gone

through unprecedented change and now

advisors who never considered leaving are

weighing all the options By Frances A. McMorris

ofLureThe

Cover Story

30 onwallstreet July 2009 www.onwallstreet.com

030_OWS 1 6/12/2009 4:45:25 PM

For 14 years, Jason DiLauro was the epitome of the Merrill Lynch financial advisor who was devoted to the firm. Based in Merrill’s Akron, Ohio office, DiLauro was a big producer and even ran coaching sessions for new recruits at the firm’s center in Princeton, N.J.

“I loved it there,” the 39-year-old DiLauro says of Merrill. “I never ever imagined leaving there. I kind of considered myself theposter child for the firm. The whole ‘Total Merrill.’”

No longer. Nearly three months ago, DiLauro picked up and left. He set himself up as an independent through Raymond James Financial Services four miles from his previous office.

“I’m still in the go-go-go phase over here,” he laughs. DiLauro abandoned the wirehouse world for the independents and isn’t looking back.

If he was once the poster child for Merrill, he is now the profile of the new independent financial advisor. With the wirehouses buckling under the heat of the economic meltdown and ownership of the once mightiest brokerage firms changing hands, more and more wirehouse advisors are giving independent firms a very careful look.

Of the roughly 15,000 advisors leaving national full-service brokerage firms annually, 4,275 of them choose a form of inde-pendence, according to Charles Schwab.

After all, the transformation of the traditional wirehouse space has been coming fast and furious in the past several months. The headlines have been unforgiving. Outrage over perceived Wall Street excesses coupled with a trillion-dollar loss in American wealth only chipped away at the already tarnished images of the wirehouses.

As part of its buying spree that included troubled mortgage lender, Countrywide Financial, Bank of America also acquired Merrill Lynch last year, in large part to grab its 14,000 brokers. Bank of America’s chief executive officer Ken Lewis later took heavy criticism for the deal once Merrill proved to be a drag on earnings in the fourth quarter. But more recently, Lewis stated that Merrill contributed $3.7 billion to BofA’s $4.2 billion profit in the first quarter of this year.

Morgan Stanley, one of the healthier wirehouses, entered into a joint venture with Smith Barney, the brokerage arm of troubled giant, Citigroup. The deal gives Morgan 51% ownership of the joint venture and Citigroup 49%, with Morgan getting the right to increase its stake over the next five years until it owns all of it.

Wells Fargo bought Wachovia Securities, creating a 16,000 advisor force.

Only UBS, with its UBS Wealth Management Americas arm, hasn’t changed hands. But, it too has suffered from the global economic malaise. In addition, its much-publicized legal battle with the Internal Revenue Service over divulging the names of

U.S. clients who may have evaded taxes through offshore accounts hasn’t helped its reputation.

All these events have created a perfect storm of recruiting for independent firms. “We’re seeing a lot more inquiries and more due diligence trips,” says Scott Carlson, the senior vice president in charge of sales and distribution at Woodbury Financial Services, the independent broker-dealer arm of Hartford Life. Between the beginning of the year and mid-June, Woodbury hired 130 registered representatives. The vast majority, 82% or 106 reps, came from other independent firms. Another 11 reps or 8% came from wirehouse firms.

“The wirehouse people, in particular, are looking for compari-sons,” Carlson says. But, he adds, “they are not as quick to move as an independent broker-dealer representative or a captive rep.” Carlson, who has been at the Woodbury, Minn.-based firm for 16 years, explains that the reason that wirehouse advisors are more cautious about making the jump is the culture shock. “They really have to analyze the costs and benefits.”

OPPORTUNITY KNOCKS

The increase in movement among advisors is apparent to Bill Van Law, senior vice president and Director of Business Devel-opment at Raymond James Financial Services. “We were up 45% last year over 2007,” he says, predicting an even stronger year in 2009. “This year we have people being more active. With all the stuff going on in the industry, it has created an incredible amount of dissatisfaction.”

In fact, he adds, recruiting for his firm has been up 134% be-tween May 31 of this year and last Oct. 1, the beginning of RJFS’s fiscal year. The numbers from the large wirehouses are up 373% over that time period, says Van Law.

Dissatisfaction spelled opportunity for firms like Raymond James Financial. “We recognized in the fall that things were changing,” Van Law says.

Indeed on Sunday, Sept. 14, Van Law touched down in Lima, Peru at 2 AM for the firm’s chairman’s council event. But it was also the day that the rumors of the demise of Lehman Brothers and the troubles of Merrill Lynch were reaching a crescendo. Finally, Lehman declared bankruptcy and Merrill Lynch announced it was being taken over by BofA. “I worked in my hotel room that day and took the red-eye home that night,” Van law recalls. “I recognized that this was a very, very significant opportunity for us. I said, ‘we’ve got work to do.’ What I did was just really try to lead the team to be out there and take advantage.”

Van Law along with 14 senior business development consultants around the country (four in the firm’s home city of St. Petersburg, Fla., and another 10 based in New Jersey, Seattle and Detroit) got busy reaching out to prospective advisors. The result was that the

If he was once the poster child for Merrill, he is now the profile of the new independent financial advisor. With the wirehouses buckling under the heat of the economic meltdown and ownership of the once mightiest brokerage firms changing hands, more and more wirehouse advisors are giving independent firms a very careful look.

Of the roughly 15,000 advisors leaving national full-service brokerage firms annually, 4,275 of them choose a form of independence, according to

After all, the transformation of the traditional wirehouse space has been coming fast and furious in the past several months. The headlines have been unforgiving. Outrage over perceived Wall Street excesses coupled with a trillion-dollar loss in American wealth only chipped away at the already

As part of its buying spree that included troubled mortgage lender, Countrywide Financial, Bank of America also acquired Merrill Lynch last year, in large part to grab its 14,000 brokers. Bank of America’s chief executive officer Ken Lewis later took heavy criticism for the deal once Merrill proved to be a drag on earnings in the fourth quarter. But more recently, Lewis stated that Merrill contributed $3.7 billion to BofA’s $4.2 bil-

Morgan Stanley, one of the healthier wirehouses, entered into a joint venture with Smith Barney, the bro-kerage arm of troubled giant, Citigroup. The deal gives Morgan 51% ownership of the joint venture and Citigroup 49%, with Morgan getting the right to increase its stake

Wells Fargo bought Wachovia Securities, creating

Only UBS, with its UBS Wealth Management Americas arm, hasn’t changed hands. But, it too has suffered from the global economic malaise. In addition, its much-pub-licized legal battle with the Internal Revenue Service over divulging the names of U.S. clients who may have evaded taxes through offshore accounts hasn’t helped

All these events have created a perfect storm of recruiting for independent firms. “We’re seeing a lot more inquiries and more due diligence trips,” says Scott Carlson, the senior vice president in charge of

sales and distribution at Woodbury Financial Services, the independent broker-dealer arm of Hartford Life. Between the beginning of the year and mid-June, Woodbury hired 130 registered representatives. The vast majority, 82% or 106 reps, came from other independent firms. Another 11 reps or 8% came from wirehouse firms.

“The wirehouse people, in particular, are looking for comparisons,” Carlson says. But, he adds, “they are not as quick to move as an independent broker-dealer repre-sentative or a captive rep.” Carlson, who has been at the Woodbury, Minn.-based firm for 16 years, explains that the reason that wirehouse advisors are more cautious about making the jump is the culture shock. “They really have to analyze the costs and benefits.”

OPPORTUNITY KNOCKSThe increase in movement among advisors is apparent to

Bill Van Law, senior vice president and Director of Business Development at Raymond James Financial Services. “We were up 45% last year over 2007,” he says, predicting an even stronger year in 2009. “This year we have people being more active. With all the stuff going on in the industry, it has created an incredible amount of dissatisfaction.”

In fact, he adds, recruiting for his firm has been up 134% between May 31 of this year and last Oct. 1, the beginning of RJFS’s fiscal year. The numbers from the large wirehouses are up 373% over that time period, says Van Law.

Dissatisfaction spelled opportunity for firms like Ray-mond James Financial. “We recognized in the fall that things were changing,” Van Law says.

Indeed on Sunday, Sept. 14, Van Law touched down in Lima, Peru at 2 AM for the firm’s chairman’s council event. But it was also the day that the rumors of the demise of Lehman Brothers and the troubles of Merrill Lynch were reaching a crescendo. Finally, Lehman declared bankruptcy and Merrill Lynch announced it was being taken over by BofA. “I worked in my hotel room that day and took the red-eye home that night,” Van law recalls. “I recognized that this was a very, very significant opportunity for us. I said, ‘we’ve got work to do.’ What I did was just really try to lead the team to be out there and take advantage.”

Van Law along with 14 senior business development con-sultants around the country (four in the firm’s home city of St. Petersburg, Fla., and another 10 based in New Jersey, Seattle and Detroit) got busy reaching out to prospective advisors. The result was that the number of advisors who make an in-

spection of RJFS’s home office has doubled this year. And, at the firm’s national conference in Las Vegas in

March, there were 105 advisors from other companies. “That was nearly double our previous conference,” Van Law says. Many of those visiting advisors were from wirehouses; some from Merrill Lynch, he says.

DiLauro, who switched to RJFS from Merrill, began thinking about leaving once Merrill said it was being taken over by BofA. “It wasn’t the same house as it was before.” He began his career at Merrill, he says, because “when you want to play in the major leagues, you might as well play for the Yankees. I loved it there.” He believed in the “Total Merrill” platform. “To Merrill’s credit, the way they hired us and trained us and the way it was survival of the fittest in the first few years, you have that mentality that you always have to grow your business.” Merrill helped sculpt him into a success. “You have it embedded into you,” DiLauro says. And he thought he would stay there for his entire career.

But, the banking philosophy was too different from the brokerage perspective, DiLauro says. And, finally, last December, he decided to go. “It was emotionally very, very wrenching for me to pull the trigger.”

DiLauro interviewed nine firms and then visited three, including Raymond James. “I had to go to a firm that felt like Merrill and RJFS was a good fit,” he says. The bulk of DiLauro’s clients are within three years of retirement. Many of them are corporate executives. “I looked at all the national firms. But, they were all in the same boat.”

We’re seeing a lot more inquiries andmore due diligence trips.

- Scott Carlson Woodbury Financial Services.

The Lure of Independence

www.onwallstreet.com July 2009 onwallstreet 33

033_OWS 4 6/12/2009 4:47:35 PM

If he was once the poster child for Merrill, he is now the profile of the new independent financial advisor. With the wirehouses buckling under the heat of the economic meltdown and ownership of the once mightiest brokerage firms changing hands, more and more wirehouse advisors are giving independent firms a very careful look.

Of the roughly 15,000 advisors leaving national full-service brokerage firms annually, 4,275 of them choose a form of independence, according to

After all, the transformation of the traditional wirehouse space has been coming fast and furious in the past several months. The headlines have been unforgiving. Outrage over perceived Wall Street excesses coupled with a trillion-dollar loss in American wealth only chipped away at the already

As part of its buying spree that included troubled mortgage lender, Countrywide Financial, Bank of America also acquired Merrill Lynch last year, in large part to grab its 14,000 brokers. Bank of America’s chief executive officer Ken Lewis later took heavy criticism for the deal once Merrill proved to be a drag on earnings in the fourth quarter. But more recently, Lewis stated that Merrill contributed $3.7 billion to BofA’s $4.2 bil-

Morgan Stanley, one of the healthier wirehouses, entered into a joint venture with Smith Barney, the bro-kerage arm of troubled giant, Citigroup. The deal gives Morgan 51% ownership of the joint venture and Citigroup 49%, with Morgan getting the right to increase its stake

Wells Fargo bought Wachovia Securities, creating

Only UBS, with its UBS Wealth Management Americas arm, hasn’t changed hands. But, it too has suffered from the global economic malaise. In addition, its much-pub-licized legal battle with the Internal Revenue Service over divulging the names of U.S. clients who may have evaded taxes through offshore accounts hasn’t helped

All these events have created a perfect storm of recruiting for independent firms. “We’re seeing a lot more inquiries and more due diligence trips,” says Scott Carlson, the senior vice president in charge of

sales and distribution at Woodbury Financial Services, the independent broker-dealer arm of Hartford Life. Between the beginning of the year and mid-June, Woodbury hired 130 registered representatives. The vast majority, 82% or 106 reps, came from other independent firms. Another 11 reps or 8% came from wirehouse firms.

“The wirehouse people, in particular, are looking for comparisons,” Carlson says. But, he adds, “they are not as quick to move as an independent broker-dealer repre-sentative or a captive rep.” Carlson, who has been at the Woodbury, Minn.-based firm for 16 years, explains that the reason that wirehouse advisors are more cautious about making the jump is the culture shock. “They really have to analyze the costs and benefits.”

OPPORTUNITY KNOCKSThe increase in movement among advisors is apparent to

Bill Van Law, senior vice president and Director of Business Development at Raymond James Financial Services. “We were up 45% last year over 2007,” he says, predicting an even stronger year in 2009. “This year we have people being more active. With all the stuff going on in the industry, it has created an incredible amount of dissatisfaction.”

In fact, he adds, recruiting for his firm has been up 134% between May 31 of this year and last Oct. 1, the beginning of RJFS’s fiscal year. The numbers from the large wirehouses are up 373% over that time period, says Van Law.

Dissatisfaction spelled opportunity for firms like Ray-mond James Financial. “We recognized in the fall that things were changing,” Van Law says.

Indeed on Sunday, Sept. 14, Van Law touched down in Lima, Peru at 2 AM for the firm’s chairman’s council event. But it was also the day that the rumors of the demise of Lehman Brothers and the troubles of Merrill Lynch were reaching a crescendo. Finally, Lehman declared bankruptcy and Merrill Lynch announced it was being taken over by BofA. “I worked in my hotel room that day and took the red-eye home that night,” Van law recalls. “I recognized that this was a very, very significant opportunity for us. I said, ‘we’ve got work to do.’ What I did was just really try to lead the team to be out there and take advantage.”

Van Law along with 14 senior business development con-sultants around the country (four in the firm’s home city of St. Petersburg, Fla., and another 10 based in New Jersey, Seattle and Detroit) got busy reaching out to prospective advisors. The result was that the number of advisors who make an in-

spection of RJFS’s home office has doubled this year. And, at the firm’s national conference in Las Vegas in

March, there were 105 advisors from other companies. “That was nearly double our previous conference,” Van Law says. Many of those visiting advisors were from wirehouses; some from Merrill Lynch, he says.

DiLauro, who switched to RJFS from Merrill, began thinking about leaving once Merrill said it was being taken over by BofA. “It wasn’t the same house as it was before.” He began his career at Merrill, he says, because “when you want to play in the major leagues, you might as well play for the Yankees. I loved it there.” He believed in the “Total Merrill” platform. “To Merrill’s credit, the way they hired us and trained us and the way it was survival of the fittest in the first few years, you have that mentality that you always have to grow your business.” Merrill helped sculpt him into a success. “You have it embedded into you,” DiLauro says. And he thought he would stay there for his entire career.

But, the banking philosophy was too different from the brokerage perspective, DiLauro says. And, finally, last December, he decided to go. “It was emotionally very, very wrenching for me to pull the trigger.”

DiLauro interviewed nine firms and then visited three, including Raymond James. “I had to go to a firm that felt like Merrill and RJFS was a good fit,” he says. The bulk of DiLauro’s clients are within three years of retirement. Many of them are corporate executives. “I looked at all the national firms. But, they were all in the same boat.”

We’re seeing a lot more inquiries andmore due diligence trips.

- Scott Carlson Woodbury Financial Services.

The Lure of Independence

www.onwallstreet.com July 2009 onwallstreet 33

033_OWS 4 6/12/2009 4:47:35 PM

If he was once the poster child for Merrill, he is now the profile of the new independent financial advisor. With the wirehouses buckling under the heat of the economic meltdown and ownership of the once mightiest brokerage firms changing hands, more and more wirehouse advisors are giving independent firms a very careful look.

Of the roughly 15,000 advisors leaving national full-service brokerage firms annually, 4,275 of them choose a form of independence, according to

After all, the transformation of the traditional wirehouse space has been coming fast and furious in the past several months. The headlines have been unforgiving. Outrage over perceived Wall Street excesses coupled with a trillion-dollar loss in American wealth only chipped away at the already

As part of its buying spree that included troubled mortgage lender, Countrywide Financial, Bank of America also acquired Merrill Lynch last year, in large part to grab its 14,000 brokers. Bank of America’s chief executive officer Ken Lewis later took heavy criticism for the deal once Merrill proved to be a drag on earnings in the fourth quarter. But more recently, Lewis stated that Merrill contributed $3.7 billion to BofA’s $4.2 bil-

Morgan Stanley, one of the healthier wirehouses, entered into a joint venture with Smith Barney, the bro-kerage arm of troubled giant, Citigroup. The deal gives Morgan 51% ownership of the joint venture and Citigroup 49%, with Morgan getting the right to increase its stake

Wells Fargo bought Wachovia Securities, creating

Only UBS, with its UBS Wealth Management Americas arm, hasn’t changed hands. But, it too has suffered from the global economic malaise. In addition, its much-pub-licized legal battle with the Internal Revenue Service over divulging the names of U.S. clients who may have evaded taxes through offshore accounts hasn’t helped

All these events have created a perfect storm of recruiting for independent firms. “We’re seeing a lot more inquiries and more due diligence trips,” says Scott Carlson, the senior vice president in charge of

sales and distribution at Woodbury Financial Services, the independent broker-dealer arm of Hartford Life. Between the beginning of the year and mid-June, Woodbury hired 130 registered representatives. The vast majority, 82% or 106 reps, came from other independent firms. Another 11 reps or 8% came from wirehouse firms.

“The wirehouse people, in particular, are looking for comparisons,” Carlson says. But, he adds, “they are not as quick to move as an independent broker-dealer repre-sentative or a captive rep.” Carlson, who has been at the Woodbury, Minn.-based firm for 16 years, explains that the reason that wirehouse advisors are more cautious about making the jump is the culture shock. “They really have to analyze the costs and benefits.”

OPPORTUNITY KNOCKSThe increase in movement among advisors is apparent to

Bill Van Law, senior vice president and Director of Business Development at Raymond James Financial Services. “We were up 45% last year over 2007,” he says, predicting an even stronger year in 2009. “This year we have people being more active. With all the stuff going on in the industry, it has created an incredible amount of dissatisfaction.”

In fact, he adds, recruiting for his firm has been up 134% between May 31 of this year and last Oct. 1, the beginning of RJFS’s fiscal year. The numbers from the large wirehouses are up 373% over that time period, says Van Law.

Dissatisfaction spelled opportunity for firms like Ray-mond James Financial. “We recognized in the fall that things were changing,” Van Law says.

Indeed on Sunday, Sept. 14, Van Law touched down in Lima, Peru at 2 AM for the firm’s chairman’s council event. But it was also the day that the rumors of the demise of Lehman Brothers and the troubles of Merrill Lynch were reaching a crescendo. Finally, Lehman declared bankruptcy and Merrill Lynch announced it was being taken over by BofA. “I worked in my hotel room that day and took the red-eye home that night,” Van law recalls. “I recognized that this was a very, very significant opportunity for us. I said, ‘we’ve got work to do.’ What I did was just really try to lead the team to be out there and take advantage.”

Van Law along with 14 senior business development con-sultants around the country (four in the firm’s home city of St. Petersburg, Fla., and another 10 based in New Jersey, Seattle and Detroit) got busy reaching out to prospective advisors. The result was that the number of advisors who make an in-

spection of RJFS’s home office has doubled this year. And, at the firm’s national conference in Las Vegas in

March, there were 105 advisors from other companies. “That was nearly double our previous conference,” Van Law says. Many of those visiting advisors were from wirehouses; some from Merrill Lynch, he says.

DiLauro, who switched to RJFS from Merrill, began thinking about leaving once Merrill said it was being taken over by BofA. “It wasn’t the same house as it was before.” He began his career at Merrill, he says, because “when you want to play in the major leagues, you might as well play for the Yankees. I loved it there.” He believed in the “Total Merrill” platform. “To Merrill’s credit, the way they hired us and trained us and the way it was survival of the fittest in the first few years, you have that mentality that you always have to grow your business.” Merrill helped sculpt him into a success. “You have it embedded into you,” DiLauro says. And he thought he would stay there for his entire career.

But, the banking philosophy was too different from the brokerage perspective, DiLauro says. And, finally, last December, he decided to go. “It was emotionally very, very wrenching for me to pull the trigger.”

DiLauro interviewed nine firms and then visited three, including Raymond James. “I had to go to a firm that felt like Merrill and RJFS was a good fit,” he says. The bulk of DiLauro’s clients are within three years of retirement. Many of them are corporate executives. “I looked at all the national firms. But, they were all in the same boat.”

We’re seeing a lot more inquiries andmore due diligence trips.

- Scott Carlson Woodbury Financial Services.

The Lure of Independence

www.onwallstreet.com July 2009 onwallstreet 33

033_OWS 4 6/12/2009 4:47:35 PM

number of advisors who make an inspection of RJFS’s home office has doubled this year.

And, at the firm’s national conference in Las Vegas in March, there were 105 advisors from other companies. “That was nearly double our previous conference,” Van Law says. Many of those visiting advisors were from wirehouses; some from Merrill Lynch, he says.

DiLauro, who switched to RJFS from Merrill, began thinking about leaving once Merrill said it was being taken over by BofA. “It wasn’t the same house as it was before.” He began his career at Merrill, he says, because “when you want to play in the major leagues, you might as well play for the Yan-kees. I loved it there.” He believed in the “To-tal Merrill” platform. “To Merrill’s credit, the way they hired us and trained us and the way it was survival of the fittest in the first few years, you have that mentality that you always have to grow your business.” Mer-rill helped sculpt him into a success. “You have it embedded into you,” DiLauro says. And he thought he would stay there for his entire career.

But, the banking philosophy was too dif-ferent from the broker-age perspective, DiLauro says. And, finally, last December, he decided to go. “It was emotionally very, very wrenching for me to pull the trigger.”

DiLauro interviewed nine firms and then visited three, includ-ing Raymond James. “I had to go to a firm that felt like Merrill and RJFS was a good fit,” he says. The bulk of DiLauro’s clients are within three years of retirement. Many of them are corporate executives. “I looked at all the national firms. But, they were all in the same boat.”

A wealth manager, DiLauro had to find a firm that could handle what he did: insurance, the credit side of a balance sheet, mortgages, estate planning, long-term healthcare and more. “There was no way I could do one of those boutique-y places and offer the services I did before.”

OTHER AVENUESNot every advisor who leaves a wirehouse is comfortable go-

ing fully independent. Some are going to the employee units of smaller brokerage firms while others are taking on the mantle of registered investment advisor firms.

Take Adam Campbell of the The Sextant Group and Ivan Gordon of The Miedema/Gordon Group. Both came from Smith Barney and went over to the employee arm of Raymond James & Associates very recently.

Campbell started at Smith Barney in 1993. Along with James Ray and Wilson Studstill, his other partners at Sextant, they all

thought they would begin and end their careers at Smith Barney. Then came the financial troubles of its parent, Citigroup, followed by the announcement of the joint venture with Morgan Stanley. “We started looking at options at the end of last year,” he says.

Gordon adds that he first examined the joint venture and then interviewed with other wirehouses before settling on Raymond James because it was “much more conservative and client-focused. They didn’t get themselves in the same kind of problems that Citigroup did. That’s because 85% of Raymond James’s revenue comes from the advisors.”

And the fact that Raymond James didn’t take any TARP money also pleased Campbell.

“The process of looking for a new brokerage home was both

If he was once the poster child for Merrill, he is now the profile of the new independent financial advisor. With the wirehouses buckling under the heat of the economic meltdown and ownership of the once mightiest brokerage firms changing hands, more and more wirehouse advisors are giving independent firms a very careful look.

Of the roughly 15,000 advisors leaving national full-service brokerage firms annually, 4,275 of them choose a form of independence, according to

After all, the transformation of the traditional wirehouse space has been coming fast and furious in the past several months. The headlines have been unforgiving. Outrage over perceived Wall Street excesses coupled with a trillion-dollar loss in American wealth only chipped away at the already

As part of its buying spree that included troubled mortgage lender, Countrywide Financial, Bank of America also acquired Merrill Lynch last year, in large part to grab its 14,000 brokers. Bank of America’s chief executive officer Ken Lewis later took heavy criticism for the deal once Merrill proved to be a drag on earnings in the fourth quarter. But more recently, Lewis stated that Merrill contributed $3.7 billion to BofA’s $4.2 bil-

Morgan Stanley, one of the healthier wirehouses, entered into a joint venture with Smith Barney, the bro-kerage arm of troubled giant, Citigroup. The deal gives Morgan 51% ownership of the joint venture and Citigroup 49%, with Morgan getting the right to increase its stake

Wells Fargo bought Wachovia Securities, creating

Only UBS, with its UBS Wealth Management Americas arm, hasn’t changed hands. But, it too has suffered from the global economic malaise. In addition, its much-pub-licized legal battle with the Internal Revenue Service over divulging the names of U.S. clients who may have evaded taxes through offshore accounts hasn’t helped

All these events have created a perfect storm of recruiting for independent firms. “We’re seeing a lot more inquiries and more due diligence trips,” says Scott Carlson, the senior vice president in charge of

sales and distribution at Woodbury Financial Services, the independent broker-dealer arm of Hartford Life. Between the beginning of the year and mid-June, Woodbury hired 130 registered representatives. The vast majority, 82% or 106 reps, came from other independent firms. Another 11 reps or 8% came from wirehouse firms.

“The wirehouse people, in particular, are looking for comparisons,” Carlson says. But, he adds, “they are not as quick to move as an independent broker-dealer repre-sentative or a captive rep.” Carlson, who has been at the Woodbury, Minn.-based firm for 16 years, explains that the reason that wirehouse advisors are more cautious about making the jump is the culture shock. “They really have to analyze the costs and benefits.”

OPPORTUNITY KNOCKSThe increase in movement among advisors is apparent to

Bill Van Law, senior vice president and Director of Business Development at Raymond James Financial Services. “We were up 45% last year over 2007,” he says, predicting an even stronger year in 2009. “This year we have people being more active. With all the stuff going on in the industry, it has created an incredible amount of dissatisfaction.”

In fact, he adds, recruiting for his firm has been up 134% between May 31 of this year and last Oct. 1, the beginning of RJFS’s fiscal year. The numbers from the large wirehouses are up 373% over that time period, says Van Law.

Dissatisfaction spelled opportunity for firms like Ray-mond James Financial. “We recognized in the fall that things were changing,” Van Law says.

Indeed on Sunday, Sept. 14, Van Law touched down in Lima, Peru at 2 AM for the firm’s chairman’s council event. But it was also the day that the rumors of the demise of Lehman Brothers and the troubles of Merrill Lynch were reaching a crescendo. Finally, Lehman declared bankruptcy and Merrill Lynch announced it was being taken over by BofA. “I worked in my hotel room that day and took the red-eye home that night,” Van law recalls. “I recognized that this was a very, very significant opportunity for us. I said, ‘we’ve got work to do.’ What I did was just really try to lead the team to be out there and take advantage.”

Van Law along with 14 senior business development con-sultants around the country (four in the firm’s home city of St. Petersburg, Fla., and another 10 based in New Jersey, Seattle and Detroit) got busy reaching out to prospective advisors. The result was that the number of advisors who make an in-

spection of RJFS’s home office has doubled this year. And, at the firm’s national conference in Las Vegas in

March, there were 105 advisors from other companies. “That was nearly double our previous conference,” Van Law says. Many of those visiting advisors were from wirehouses; some from Merrill Lynch, he says.

DiLauro, who switched to RJFS from Merrill, began thinking about leaving once Merrill said it was being taken over by BofA. “It wasn’t the same house as it was before.” He began his career at Merrill, he says, because “when you want to play in the major leagues, you might as well play for the Yankees. I loved it there.” He believed in the “Total Merrill” platform. “To Merrill’s credit, the way they hired us and trained us and the way it was survival of the fittest in the first few years, you have that mentality that you always have to grow your business.” Merrill helped sculpt him into a success. “You have it embedded into you,” DiLauro says. And he thought he would stay there for his entire career.

But, the banking philosophy was too different from the brokerage perspective, DiLauro says. And, finally, last December, he decided to go. “It was emotionally very, very wrenching for me to pull the trigger.”

DiLauro interviewed nine firms and then visited three, including Raymond James. “I had to go to a firm that felt like Merrill and RJFS was a good fit,” he says. The bulk of DiLauro’s clients are within three years of retirement. Many of them are corporate executives. “I looked at all the national firms. But, they were all in the same boat.”

We’re seeing a lot more inquiries andmore due diligence trips.

- Scott Carlson Woodbury Financial Services.

The Lure of Independence

www.onwallstreet.com July 2009 onwallstreet 33

033_OWS 4 6/12/2009 4:47:35 PM

A wealth manager, DiLauro had to find a firm that could handle what he did: insurance, the credit side of a balance sheet, mortgages, estate planning, long-term healthcare and more. “There was no way I could do one of those boutique-y places and offer the services I did before.”

OTHER AVENUESNot every advisor who leaves a wirehouse is comfortable

going fully independent. Some are going to the employee units of smaller brokerage firms while others are taking on the mantle of registered investment advisor firms.

then interviewed with other wirehouses before settling on Raymond James because it was “much more conservative and client-focused. They didn’t get themselves in the same kind of problems that Citigroup did. That’s because 85% of Raymond James’s revenue comes from the advisors.”

TARP money also pleased Campbell.

both eye-opening and overwhelming,” Campbell says. They had to kick the tires of firms they were considering. They scrutinized technology. “It was a major change for us and for our clients. It ’s like moving a small bank,” he says. At Smith Barney, the Sextant Group had more than $2.3 million in annual revenue and managed more than $370 million in client assets.

through years of employment. “It ’s a very difficult decision,” Gordon says of the plan to move with four colleagues, including Ken Miedema. “It wasn’t like we had a bad life. We liked Smith Barney.” The Miedema/Gordon Group managed client assets in excess of $190 million and had approximately $1.9 million in annual revenue.

April 17 at 3:30 PM and made the transition to RJA—in the same building. “We had four minutes of unemployment,” he laughs. “We went from the sixth f loor to the 21st. The clients appreciated it because they are familiar with the building.”

feel as much Big Brotherness. You feel more of a partnership.”

THE RIA ROUTE

former managing directors at Morgan Stanley Global Wealth Management Group, created Seacrest Wealth Management LLC in Purchase, New York.

hires advisors from the major wirehouses and similar firms, Sullivan says. The firm currently has 15 advisors now in four offices; with plans to have seven offices by the end of the year. Seacrest is recruiting $300,000 to $500,000 producers with 10 to 15 years of services. The

At the recent Raymond James

national conference, there were 105

advisors from other companies.

“That was nearly double our previous

conference.”- Bill Van Law of RJFS

Take Adam Campbell of the The Sextant Group and Ivan Gordon of The Miedema/Gordon Group. Both came from Smith Barney and went over to the employee arm of Raymond James & Associates very recently.

Campbell started at Smith Barney in 1993. Along with James Ray and Wilson Studstill, his other partners at Sextant, they all thought they would begin and end their careers at Smith Barney. Then came the financial troubles of its parent, Citigroup, followed by the announcement of the joint venture with Morgan Stanley. “We started looking at options at the end of last year,” he says.

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eye-opening and overwhelming,” Campbell says. They had to kick the tires of firms they were considering. They scrutinized technology. “It was a major change for us and for our clients. It ’s like moving a small bank,” he says. At Smith Barney, the Sextant Group had more than $2.3 million in annual revenue and managed more than $370 million in client assets.

Then, there were the ties to Smith Barney created through years of employment. “It ’s a very difficult decision,” Gordon says of the plan to move with four colleagues, including Ken Miedema. “It wasn’t like we had a bad life. We liked Smith Barney.” The Miedema/Gordon Group managed client assets in excess of $190 million and had approximately $1.9 million in annual revenue.

Gordon and his team left Smith Barney on Friday, April 17 at 3:30 PM and made the transition to RJA—in the same building. “We had four minutes of unemployment,” he laughs. “We went from the sixth f loor to the 21st. The clients appreciated it because they are familiar with the building.”

But the firms are very different, he says. “You don’t feel as much Big Brotherness. You feel more of a partnership.”

Campbell adds: “There is less red tape.”“Less layers of management,” Gordon adds.

THE RIA ROUTEJust over a year ago, Rick Sanchez and Ed Sullivan, former

managing directors at Morgan Stanley Global Wealth Management Group, created Seacrest Wealth Management LLC in Purchase, New York.

Using Charles Schwab as its RIA platform, Seacrest hires advi-sors from the major wirehouses and similar firms, Sullivan says. The firm currently has 15 advisors now in four offices; with plans to have seven offices by the end of the year. Seacrest is recruiting $300,000 to $500,000 producers with 10 to 15 years of services. The firm offers a hybrid platform in order to accommodate both commission and fee-based business.

“I just don’t think the lure of the major firms is what it used to be,” says Sullivan, a 25-year veteran of Morgan Stanley. He joined Morgan Stanley in 1981 when it was Dean Witter. Through his tenure

there, he managed offices for the firm on Long Island, New York and in Vermont. He also managed the Boston complex and served as a regional manager for six years. In his last five years with Morgan, he was a regional director overseeing New England, New York state and Pennsylvania.

So, leaving Morgan Stanley wasn’t easy. But with all the turmoil in the industry and the resulting consolidation, he recognized that it might be a time for a change. “Clients are fed up and advisors are fed up trying to explain to them why some rogue trading desk has put [the firm’s] name in the headlines,” he says.

The RIA model was the answer for Sullivan and his colleagues. “We’re not looking to own clients,” he says. “The advisors join us; they own the client. We can give them a substantially bigger payout. We’ve worked very good economies with the platform providers.”

And any concerns about technology is unnecessary, Sullivan says. “I could make the case that Schwab’s technology is superior.” Moreover, he says, advisors favored wirehouses for research. But, “that side of the business has been commoditized,” he says.

Sullivan and his team spent hundreds of hours discussing the type of firm they wanted to be, he says. “I think it ’s just great having your own operation that has a very bright future. I get a lot of self-satisfaction.”

It’s the same for DiLauro of RJFS following his time at Merrill. Since he has made the change, he has been joined by another former Merrill colleague.

“There hasn’t been a week that my decision has not been validated,” DiLauro says. He is still bringing over clients and so far, 80% have made the move with him. “I have a few more to go.” When he first told them he was leaving Merrill, 70% of his clients were “resoundingly happy,” he says. Another 20% had questions while another 10%, he says, asked “’what the heck do we do now?’” DiLauro had longer meetings with that last group.

He acknowledges that the paperwork is challenging and it ’s not for everyone. However, he says: “Ultimately, if you’re going to take care of your clients, you are going to prevail wherever you are.” ows

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If he was once the poster child for Merrill, he is now the profile of the new independent financial advisor. With the wirehouses buckling under the heat of the economic meltdown and ownership of the once mightiest brokerage firms changing hands, more and more wirehouse advisors are giving independent firms a very careful look.

Of the roughly 15,000 advisors leaving national full-service brokerage firms annually, 4,275 of them choose a form of independence, according to

After all, the transformation of the traditional wirehouse space has been coming fast and furious in the past several months. The headlines have been unforgiving. Outrage over perceived Wall Street excesses coupled with a trillion-dollar loss in American wealth only chipped away at the already

As part of its buying spree that included troubled mortgage lender, Countrywide Financial, Bank of America also acquired Merrill Lynch last year, in large part to grab its 14,000 brokers. Bank of America’s chief executive officer Ken Lewis later took heavy criticism for the deal once Merrill proved to be a drag on earnings in the fourth quarter. But more recently, Lewis stated that Merrill contributed $3.7 billion to BofA’s $4.2 bil-

Morgan Stanley, one of the healthier wirehouses, entered into a joint venture with Smith Barney, the bro-kerage arm of troubled giant, Citigroup. The deal gives Morgan 51% ownership of the joint venture and Citigroup 49%, with Morgan getting the right to increase its stake

Wells Fargo bought Wachovia Securities, creating

Only UBS, with its UBS Wealth Management Americas arm, hasn’t changed hands. But, it too has suffered from the global economic malaise. In addition, its much-pub-licized legal battle with the Internal Revenue Service over divulging the names of U.S. clients who may have evaded taxes through offshore accounts hasn’t helped

All these events have created a perfect storm of recruiting for independent firms. “We’re seeing a lot more inquiries and more due diligence trips,” says Scott Carlson, the senior vice president in charge of

sales and distribution at Woodbury Financial Services, the independent broker-dealer arm of Hartford Life. Between the beginning of the year and mid-June, Woodbury hired 130 registered representatives. The vast majority, 82% or 106 reps, came from other independent firms. Another 11 reps or 8% came from wirehouse firms.

“The wirehouse people, in particular, are looking for comparisons,” Carlson says. But, he adds, “they are not as quick to move as an independent broker-dealer repre-sentative or a captive rep.” Carlson, who has been at the Woodbury, Minn.-based firm for 16 years, explains that the reason that wirehouse advisors are more cautious about making the jump is the culture shock. “They really have to analyze the costs and benefits.”

OPPORTUNITY KNOCKSThe increase in movement among advisors is apparent to

Bill Van Law, senior vice president and Director of Business Development at Raymond James Financial Services. “We were up 45% last year over 2007,” he says, predicting an even stronger year in 2009. “This year we have people being more active. With all the stuff going on in the industry, it has created an incredible amount of dissatisfaction.”

In fact, he adds, recruiting for his firm has been up 134% between May 31 of this year and last Oct. 1, the beginning of RJFS’s fiscal year. The numbers from the large wirehouses are up 373% over that time period, says Van Law.

Dissatisfaction spelled opportunity for firms like Ray-mond James Financial. “We recognized in the fall that things were changing,” Van Law says.

Indeed on Sunday, Sept. 14, Van Law touched down in Lima, Peru at 2 AM for the firm’s chairman’s council event. But it was also the day that the rumors of the demise of Lehman Brothers and the troubles of Merrill Lynch were reaching a crescendo. Finally, Lehman declared bankruptcy and Merrill Lynch announced it was being taken over by BofA. “I worked in my hotel room that day and took the red-eye home that night,” Van law recalls. “I recognized that this was a very, very significant opportunity for us. I said, ‘we’ve got work to do.’ What I did was just really try to lead the team to be out there and take advantage.”

Van Law along with 14 senior business development con-sultants around the country (four in the firm’s home city of St. Petersburg, Fla., and another 10 based in New Jersey, Seattle and Detroit) got busy reaching out to prospective advisors. The result was that the number of advisors who make an in-

spection of RJFS’s home office has doubled this year. And, at the firm’s national conference in Las Vegas in

March, there were 105 advisors from other companies. “That was nearly double our previous conference,” Van Law says. Many of those visiting advisors were from wirehouses; some from Merrill Lynch, he says.

DiLauro, who switched to RJFS from Merrill, began thinking about leaving once Merrill said it was being taken over by BofA. “It wasn’t the same house as it was before.” He began his career at Merrill, he says, because “when you want to play in the major leagues, you might as well play for the Yankees. I loved it there.” He believed in the “Total Merrill” platform. “To Merrill’s credit, the way they hired us and trained us and the way it was survival of the fittest in the first few years, you have that mentality that you always have to grow your business.” Merrill helped sculpt him into a success. “You have it embedded into you,” DiLauro says. And he thought he would stay there for his entire career.

But, the banking philosophy was too different from the brokerage perspective, DiLauro says. And, finally, last December, he decided to go. “It was emotionally very, very wrenching for me to pull the trigger.”

DiLauro interviewed nine firms and then visited three, including Raymond James. “I had to go to a firm that felt like Merrill and RJFS was a good fit,” he says. The bulk of DiLauro’s clients are within three years of retirement. Many of them are corporate executives. “I looked at all the national firms. But, they were all in the same boat.”

We’re seeing a lot more inquiries andmore due diligence trips.

- Scott Carlson Woodbury Financial Services.

The Lure of Independence

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Raymond James Financial Services, Inc., member FINRA/SIPC, is a subsidiary of Raymond James Financial, Inc.