Morgan Stanley Nabs Another Merrill Int’l Team with $3.5 Million Production
(Corrects 10th paragraph to say that existing nonresident client accounts have to reach a minimum of $1 million by October 1.)
One of the last Merrill Lynch teams serving Latin American clients from San Diego jumped to Morgan Stanley this week, underscoring Merrill’s near-abandonment of the compliance-sensitive international brokerage business.
The six person Marek-Douek group, launched when Andres Marek joined Merrill almost 30 years ago, produced about $3.5 million of revenue in the past year, according to two people familiar with the San Diego non-resident client office. The team also includes advisors Shlomo Steven Douek and Eduardo Marek, Andres’s son, along with three client associates.
Merrill’s nonresident client office (NRC) in San Diego has been whittled down to five-to-ten advisors from some 36 a few years ago as the Bank of America-owned broker-dealer imposed heavy restrictions on doing business with nonresident clients, said two people who left Merrill in the past year.
Spokeswomen at the Bank of America-owned brokerage firm and at Morgan Stanley confirmed the Marek-Douek move but declined to comment on the size of the team’s book.
Marek and Douek, whose team works largely with Mexican clients, according to the source, did not respond to calls for comment, and Morgan Stanley’s San Diego complex manager declined to discuss the hires.
Morgan Stanley in the past few months has recruited brokers responsible for about 45% of the San Diego NRC office’s annual revenue of about $20 million, according to a former Merrill manager familiar with the teams. That is well above “severe economic impact” level of 33% that can justify a raiding suit, securities lawyers said. If Merrill does not bring such a suit, it sends a message to the firm’s remaining brokers that it truly does not care about the business, the former official said.
Merrill’s San Diego complex website continues to promote its NRC business.
“[I]nternational advisors have access to internal international tax and estate planning specialists, and are well positioned to handle non-resident clients’ unique situations,” it says.
Recent policy changes, however, point in a different direction.
Merrill sold its international private client business to Julius Baer in 2012, and in July 2015 raised minimum balances on U.S. accounts of non-U.S. residents to $2.5 million in a select group of “core” countries (primarily in Canada and South America), doubled minimum account sizes to $5 million in 21 other countries and gave brokers until October of this year to bring grandfathered balances up to $1 million.
The firm earlier dictated that nonresident account owners annually travel to their U.S. office to personally affirm their ownership.
The moves reflect large banks’ insecurities about stepped-up enforcement in the U.S. of anti-money-laundering and Foreign Corrupt Practices Act laws, particularly in businesses that do not generate home-country economies of scale.
The Merrill and Morgan Stanley spokeswomen declined to comment on potential lawsuits.
Although Morgan Stanley has been swimming against the tide in laying out the welcome mat for brokers with large international books, it also has been “whittling down its NRC business so only 400 of its U.S.-based advisors can work” with out-of-country retail clients, Rob Mooney, chief executive of Snowden Lane Partners wrote in a December trade magazine article. Snowden Lane is a “boutique” formed by former Merrill Lynch executives that has been actively recruiting brokers with warnings that big firms’ loyalty to their business is wavering.
Three former Merrill NRC brokers filed a lawsuit in Miami in April alleging that Merrill misled them about its commitment to their international clients and seeking class-action status. It remains in process, as does a suit from a nonresident client alleging negligence and breach-of-contract over the closing of accounts he and his daughter had at Merrill.