First Republic Ups Incentives for Recruiters in Bid for Big Advisors
First Republic Bank is incentivizing certain headhunters with a big placement fee if they introduce high-producing qualifying advisers to its expanding wealth management unit before April 1.
The San Francisco-based private bank will pay recruiters 12% of the revenue that new brokers generated at their former firms over the previous 12 months—double the industry standard—if the candidates introduced in coming weeks are hired in 2021, according to two recruiters who spoke on condition of anonymity. That would yield a headhunter $240,000 for a $2 million producer, the minimum the deal applies to.
The premium offer was disclosed in recent days through emails and other communications from Robert Thornton, president of First Republic Private Wealth Management, and other bank executives to a small group of recruiters, the sources said.
A First Republic spokesman declined to explain the timing of the offering.
“We continue to pay at or above the market rate to recruiters, depending on the geographic market and other factors,” he said. “Recruiting fees are just part of First Republic’s success in recruiting wealth managers.”
The publicly traded bank in recent years has attracted dozens of top-ranked advisors from traditional brokerage firms—including Phil Scott, a 35-year Merrill Lynch superstar whose Washington State team was producing around $18 million in trailing-12 revenue before he left last summer.
But First Republic still employs only about 200 advisors at its private wealth management unit, according to a company web page. (In addition to the advisors who are dubbed “wealth managers,” the site lists private bank rainmakers known as “wealth advisors,” advisors who join with corporate titles such as managing director and trust bankers, planners and family office and “family engagement and governance” consultants.)
The offer to recruiters underscores the bank’s ambition to go beyond its core mortgage, trust and related services to manage investments of the very wealthy by drawing their brokers.
“They have to be north of $2 million, have clean records and work with private wealth management clients,” one of the sources said of the candidates being sought.
First Republic is not the first to rally outside recruiters to help them meet short-term ambitions.
Wells Fargo Advisors since 2018 has been offering recruiters as much as 10% of the trailing-12 production of successfully placed advisors in its bid to fill seats vacated by advisors who fled in the years following the bank’s headline-making fake account scandals. (Wells is tweaking the deal this year, offering tiered premiums that rise with the number of candidates successfully introduced by particular headhunters.)
First Republic’s payout formula—the percentage of client fees and commissions pocketed by an advisor—is generally not as high as those at national brokerage firms, and is substantially lower for sub-$2 million producers, recruiters said. But successful advisors get “spectacular lead flows” from salaried private bankers who service the very wealthy, and also are credited on payout grids for more bank services and products used by their clients than they can get at UBS, Morgan Stanley, Merrill Lynch, the headhunters said.
First Republic also offers tailored “forgivable loan” recruiting packages that often approach twice trailing-12-month revenue in upfront cash, and can reach beyond three times revenue when deferred compensation and production or asset-transfer goals are hit, said one of the firm’s recruiters.
In 2020, the bank recruited 25 advisors spread among eight wealth management practices, it said in its fourth-quarter earnings report. Based on their T-12 numbers, the year was a record.
Customer assets at First Republic Wealth Management grew 29% in 2020 to more than $194 billion. Well over half of the growth came from net client inflow, not market gains, bank officials said in a nod to the value of their new recruits.
First Republic added ten multi-million dollar teams in 2019 but suffered a setback when a $16-billion-asset team of former Merrill advisors left to form independent registered investment advisory firms.