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FEATURE STORY
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Branch
Consolidation At Smith Barney: An Isolated Cost-Cutting Measure Or The
Beginning Of The End For BOMs?
By Susan Konig
As part of a larger cost-cutting effort, Smith Barney is
consolidating some of its branch offices and laying off a number of
branch managers. Sources inside the firm believe some 30 branches will
be closed, most of which are satellite offices, offices performing in
the bottom quintile or those that are geographically isolated.
“Real estate consolidation and capacity decisions are standard
business practice,” Smith Barney Spokesman Alex Samuelson says. “We
decline to comment on specific branch rumors.”
Is the consolidation specific to Smith Barney, or part of a much broader
trend that has branch managers worrying about their role in this
ever-changing industry?
One legacy SB branch manager, who asked that his name not be printed,
called his firm “a cost-conscious, no-holds-barred operation known for
its lack of people skills and harsh treatment of managers. So, I’m not
too surprised by this move.” Still, he thinks it’s the start of
something bigger in the industry. “Ours are the first in a long line
of branch managers who’ll be going.”
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(continuation of article)
Some industry insiders are more optimistic. “We aren’t seeing
this at the other firms,” says Rick Peterson, president of Rick
Peterson Associates, a Houston-based recruiting firm. “Wachovia is
downsizing a bit, but that’s due to having acquired A.G. Edwards.”
Whether there’ll be major layoffs there remains to be seen, he says.
He doesn’t expect to see them at Merrill Lynch, UBS or Morgan Stanley.
Just because firms are hurting these days doesn’t mean they’re going
to change the way they run their businesses, Peterson adds. “Business
was down for many months preceding the recent economic crisis, yet firms
have not been closing offices left and right.”
But others aren’t so sure. Stewart Lee is a former BOM who heads Lee
Training in Wellston, Okla., and runs a consulting and practice
management firm which helps develop the SIA’s Branch Manager
Development Program. Lee thinks what’s happening at Smith Barney is
merely the tip of the iceberg. Lee says, “A bad economy—combined
with industry mergers—leads to cutbacks. Wirehouses are being taken
over by banks, which have a history of being more fiscally prudent. I
expect to see offices which are marginally successful or too
geographically close to one another as being closed. We have a perfect
storm for consolidation.”
Chip Roame, managing principal of Calif.-based Tiburon Strategic
Advisors, a leading industry research and consulting firm, thinks the
trend has already been in motion. “The structure of this industry is
changing,” Roame says. “Five years from now, all the wirehouses will
have fewer offices in fewer cities.”
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(continuation of article)
“To me, it’s the beginning of the death of the branch manager,”
says a legacy wirehouse BOM in the Midwest who asked not to be
identified. “The Golden Rule used to be that a contiguous group of
brokers in a single space needed someone with a Series 8 or 9 license
on-site to oversee them. But this industry is moving toward a
centralized system. I call it the Gorman model: having a main office
monitoring branches from afar,” he says. “Firm leadership has been
trying to convince everyone that branch management can be done remotely.
Once they started doing that, as branch managers, we were through.”
“Branch managers are a relatively expensive management layer that was
critical at one point,” Roame says. “But now, with more independent
advisors and more reps moving to fee-based business, some
portion—though, not all—of the supervisory roles will go away.
“It could be the beginning of the end for the branch manager role,”
he admits.
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(continuation of article)
Lee agrees, adding the worst part might be an “all-too-slow
death,” as firms struggle with the compliance requirements of setting
up alternate branch caretaker systems.
Though he doesn’t consider BOMs an endangered species, Peterson
concedes they are terminated “all the time. There are about 3,000 left
in the industry today, and at least one or two are let go each
week—usually due to poor performance or compliance problems.” The
positions get refilled if they’re in strategically important areas, he
says. But, in the aggregate, “The only areas of real growth are with
regional firms, and then primarily for producing managers”
Regardless, Roame says, “I don’t view this as a ‘gloom and doom’
situation. Consolidation means advisors will be going, too. That can
create a lot of great new opportunities for branch managers,” he says.
“The economics of producing at the independent level are pretty
lucrative right now. I think this is a good time for managers to think
creatively about their individual strengths and skill sets.”
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