The Incredibly Long Contract That's Vexing Credit Suisse Brokers

  • Wells Fargo deal requires an `unfathomable' 13 years at lender
  • Top wealth managers lured to UBS, Morgan Stanley and BofA

Wells Fargo & Co. has made it easy for Credit Suisse Group AG private bankers to join the San Francisco-based lender. Leaving, however, is another story.

The firms struck a recruitment deal in October allowing advisers at the Swiss bank’s shrinking U.S. operations to smoothly transition to Wells Fargo if they want. Those who take the offer must remain at Wells Fargo for 13 years to earn the full payout of bonuses tied to the agreements, much longer than the industry’s typical nine-year deal, said people with knowledge of the arrangement.

“Once something is longer than nine or 10 years, most people don’t want to sign that,” said Mark Elzweig, a New York-based executive search consultant, adding that more than 40 percent of advisers at the biggest brokerages are 55 or older. “It’s unfathomable, it becomes too much to get your head around.”

Many banks are building out their wealth-management divisions because the business offers steadier revenue and requires less capital than trading operations. Competition for the best producers reached a fever pitch this year after Credit Suisse announced it was retreating from managing money for U.S. clients, meaning 270 or so advisers needed a new home. In recent weeks, UBS Group AG, Morgan Stanley and Bank of America Corp. have picked up advisers with more than $12 billion in combined assets.

While a 13-year commitment is unusual for the industry, the length of adviser deals has grown along with the size of bonuses over the past three decades, Elzweig said. The arrangements typically pay about 300 percent of an adviser’s trailing 12-month revenue if the employee remains for the entire period and clears revenue hurdles.

Competitors are in a “feeding frenzy” for top Credit Suisse advisers, David Carroll, who runs Wells Fargo’s wealth- and investment-management division, said at a conference last month. The bank had entertained almost 80 percent of Credit Suisse’s U.S. advisers as of mid-November at its St. Louis brokerage headquarters, he said.

Morgan Stanley last month hired a New York-based Credit Suisse team advising on more than $5 billion in assets, led by Richard Zinman, Anthony Dertouzos and John Moreno. UBS said it added more than 20 Credit Suisse brokers managing more than $6.8 billion, including a Los Angeles team that oversaw $1.8 billion. Bank of America hired Nicole Primack Andres, who managed more than $600 million in client assets.

Major Focus

“The wealth business is a major area of focus for Wells Fargo and our growth in this area is fueled by our commitment to do what’s best for our clients,” Jack Grone, a spokesman for the lender, said in a statement. “We’re having productive conversations with Credit Suisse relationship managers, and we’re pleased with our progress so far.”

Grone declined to say how many Credit Suisse advisers Wells Fargo has hired. Nicole Sharp, a spokeswoman for the Zurich-based lender, declined to comment.

Carroll’s division represents Wells Fargo’s largest growth opportunity, according to Chief Executive Officer John Stumpf. It earns about $2.5 billion in profit annually and could make “a number of factors times that,” Stumpf said Dec. 8 at an investor conference in New York. The business boasts margins of more than 25 percent, he said.

Wells Fargo’s deal with Credit Suisse gives the firm access to more detailed information than it would normally get about customers, their investment portfolios and the products the Swiss lender marketed to them, a person with knowledge of the arrangement said in October. It also makes it easier for Credit Suisse employees who join Wells Fargo to transfer their business, the person said.

Spread Out

One of the few advantages of a lengthier deal would be that bonus payments are spread over a longer period, lowering advisers’ taxes in any given year, said Mindy Diamond, president of Diamond Consultants LLC, a Morristown, New Jersey-based executive-search firm.

Wells Fargo typically offers smaller bonuses than its competitors when recruiting advisers from other firms, Carroll said last month.

“If you’re out for the biggest check, there’s probably somewhere else that will write that for you,” he said. “We’re selling a long-term view, a partnership.”

(An earlier version of this story corrected the location of Diamond Consultants.)

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