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MSSB Shifts Client Accounts To Advisor Trainees

SuperUser Account posted on October 27, 2011

By Tom Stabile October 27, 2011

A new advisor training program at Morgan Stanley Smith Barney is adding what appears to be a unique feature – priming the budding advisors with established client accounts to start their careers.

The Jumpstart Training Program that the wirehouse launched in the third quarter doesn’t replace its core “financial advisor associate” education set up, a spokeswoman says. Advertisements for the new program published earlier this year couched it as “an exclusive opportunity.”

“Associates joining our Jumpstart Training Program are provided an existing client base with which to build stronger relationships and uncover additional opportunities,” stated one of the ads. “No other wealth management firm has a program that helps you launch your career with established accounts! You’ll enjoy the freedom and independence to build your business with the support of a recognized leader.”

The program also features extra training, resources, sales coaching and mentorship offerings to help prepare what the ad suggested would be an elite crew of advisor rookies.

Historically, most wirehouse advisors have had to build their books of business from scratch. As the nature of the business has shifted in the past decade from a stock-selling approach to a broader wealth management advisory model, however, industry observers say the wirehouse training programs have fallen badly short in terms of supplying new talent for the long term. Most of the observers estimate that 80% – and some say 90% – of advisors entering through the training programs leave their brokerages within the first decade.

The biggest problem is the need to establish broad client relationships and not just book a quick transaction. It’s tough for younger advisors to gain the trust of clients with big portfolios, and they will need many such relationships to quickly build the large books of business they will need to succeed at the wirehouses, says Rick Rummage, a recruiter and former Morgan Stanley branch manager. He says most training programs have faltered by prepping young advisors on how to be good financial planners without teaching them how to be “salespeople and rainmakers” who can build client bases.

“They end up with a lot of expensive, well-trained failures,” he adds. “They go on to another firm, where now they have all of that training.”

Several experienced wirehouse market recruiters, including Rummage, say they’ve never seen a program that sets up advisors with a book of clients. Rummage calls it “a reasonable plan of attack to increase the chance of success in the business.”

The program is still “in its infancy,” the Morgan Stanley Smith Barney spokeswoman says, and the brokerage is not providing statistics yet on the enrollment or on the size and number of accounts that the advisor trainees are getting at the start. “We will continue to monitor and scale the program appropriately over time,” she says.

Still, the program differs significantly from most client-managing experiences that young advisors typically get at a wirehouse, which usually entails teaming with a senior advisor and getting basic introductions, or instead focusing heavily on cold-calling prospects. In Jumpstart, advisor associates “will primarily service these clients as the lead advisor,” the spokeswoman says.

A big consideration for any brokerage attempting such a program is making sure that it is not disrupting existing advisors by taking accounts from them – either directly or by reassigning accounts from departed advisors who left clients behind, the recruiters say. With Jumpstart, Morgan Stanley Smith Barney appears to be avoiding such conflicts by sourcing accounts for the fledgling advisors from relationships currently housed in its call-center business.

 “Those are typically not accounts that would be distributed to a seasoned [advisor],” the spokeswoman says. “They tend to be smaller accounts.”

Any program tapping into the spigot of redistributed accounts that normally flow to established advisors would cause friction, which could range from “a minor squawk” to a “national squawk,” depending on the scale of the training program, says a former wirehouse executive familiar with advisor training efforts and who requested anonymity.

The Morgan Stanley Smith Barney program could well have a significant impact on trainee success rates because it tackles the main hurdle new advisors face, which is finding business, says Rick Peterson, a recruiter who heads Rick Peterson Associates. “The hardest thing for a new [advisor] to do is open up accounts while they’re still learning the operating system and how to do the job,” he adds. “And in this economy, it’s hard for anyone to open up new accounts.”

The program also gives the younger advisors an early chance to build up skills, as well as a referral base, says Bill Willis, a former Merrill Lynch complex manager who now runs Willis Consulting, a recruiting firm. “It’s a good learning experience for them to gain exposure working with clients,” he adds.

Most importantly, it gives the advisors, as well as the brokerage, the chance to mine opportunities in small accounts that probably were getting short shrift, Rummage says. Advisor trainees will likely spend extra time with small-account clients, potentially deepening the relationships and sparking chances to bring over assets that those investors might have stashed elsewhere.

“Most of those accounts have not been worked adequately, and the big question is whether that’s all the money the client has,” Rummage adds.

The program alone may not fix advisor training woes, says the former wirehouse executive who requested anonymity. Indeed, the training programs have also suffered from budget cutbacks in the wake of the market crash and subsequent turmoil among the big brokerages. And Morgan Stanley Smith Barney itself laid off 200 to 300 trainees or low-producing advisors earlier this year.

Meanwhile, the wirehouses are also trying other tacks. One Morgan Stanley Smith Barney advisor, who requested anonymity, says senior players at the brokerage are forming teams with younger advisors explicitly to groom them as successors – a practice that remains uncommon in the wirehouse world. And the former wirehouse executive says most of the big brokerages now keep their advisor associates off the main pay grid for up to five years – reducing the pressure to produce while they are still learning the business and building a client book.

The fate of the new program will likely turn on whether it works as well in practice as it seems to on paper, Willis says.

“Generally speaking, it’s a great idea, but execution is 90% of it – and the other 10% is how you get it done,” he quips.