1% to Wirehouses: BUH-Bye

Last month, I posted a long discussion on the exodus of asset managers from Merrill. According to several dozen Merrill brokers who emailed me, that post was promptly blocked by Bank of America.

Which is a shame.

Anytime you see a corporate management put its head in the sand, it is a bad sign for the future of that firm. The preference is for transparency, honest responses to criticisms, some degree of self-reflection — not Big Brother censorship. Of course, BofA long ago committed suicide with their Countrywide purchase and other mortgage follies, and exists today only due to the largesse of taxpayers who bailed them out. With that sort of poor decision-making in the DNA of the company, I cannot say I am surprised by yet another example of bad executive judgment.

The investing wealthy have come to a similar conclusion. A new Reuters article this past week is titled Merrill, Morgan Stanley seen losing grip on rich. (I wonder if BofA is going to block Reuters as well?). As it turns out, its much easier to browbeat Congressmen into handing over billions than it is to get the top 1% to do the same.

Here are the key bullet points I picked out of the Reuters column:

2008 Financial Crisis: Have led big investors to lose faith with Morgan Stanley, Citigroup and UBS — all 3 were bailed out by taxpayers — and Merrill Lynch — which was rescued by a Bank of America takeover, which itself was eventually bailed out by taxpayers.• Technology: is leveling the playing field between smaller,more nimble frims and the industry giants.

RIA and family-offices: were the fastest growing firms, increasing assets under management by 18% to $356 billion in 2010 (vs 2% among big four).

Winners & Losers: There were some winners in the asset shift — Private client units of banks such as Credit Suisse, Deutsche Bank, Bank of New York Mellon and Barclays. The Losers? Big 4 brokerages (Morgan Stanley Smith Barney, Merrill Lynch, Wells Fargo Advisors and UBS)

Here’s an excerpt from Reuters:

“The biggest U.S. brokerages have set their sights set on attracting the wealthiest Americans, but a new study concludes a growing number of multi-millionaire households are taking their money elsewhere.

The share of high net worth customers’ assets held by the top four brokers — Morgan Stanley Smith Barney, Merrill Lynch, Wells Fargo Advisors and UBS Wealth Management Americas — has fallen since the financial crisis and will continue to fall, research firm Cerulli Associates said in a report on Wednesday.

That market share, which peaked at 56 percent in 2007, fell to 45 percent last year and is expected to drop to 42 percent by 2014. The companies together had $2.1 trillion in assets from clients with at least $5 million to invest . . .

Merrill, for example, is discouraging brokers from taking on new clients with less than $250,000 so that they have more time to find and work with million-dollar accounts.Consulting firm McKinsey & Co recently declared the $1 million to $10 million account as the “sweet spot” for private banks, because these clients generate higher margins — two to three times more than investors with tens or hundreds of millions of dollars.

Waves of financial advisers, meanwhile, moved to smaller and more independent wealth managers in search of greater stability or fewer conflicts of interest.”

The rich are different than you and I. Its not just that they have more money — they are much more careful with whom they trust it to . . .


Hat tip Josh


Merrill, Morgan Stanley seen losing grip on rich
Joseph A. Giannone
Reuters, Mar 29, 2012

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