Monday, October 26, 2009

Branch Managers Being Forced to Produce

There are hundreds of producing branch managers at the wirehouses, and over recent years, the wirehouses have been pushing their BOMs to drop production and concentrate on supervision. There is some appeal to using a non-producing manager, but the firms seemed to miss an important issue - compensation.

As firms pushed managers out of production there was a disconnect on the compensation side. After all, firms were asking managers to give up a business that many of them had spent years building.

There is of course nothing wrong with having producing managers. If you staff the branch properly, a BOM can service his own clients while running a branch. It happens all over the country all the time, without incident.

But the key is staffing the branch. The BOM needs an assistant, and an ops manager, and maybe a compliance officer. You simply cannot force a BOM to supervise a branch on his own, without proper support, regardless of his personal production.

But after years of forcing managers to drop their own clients, some of the wirehouses are putting managers back into production. Why? To save costs. The firms have figured out that a non-producing manager is an expense. Shocker.

According to Registered Rep Magazine, in an effort to cut costs, some brokerage firms such as UBS and Morgan Stanley Smith Barney are restructuring their branch office organization and changing the rules about which managers must generate production. 

Putting aside the turmoil that this creates for the managers ("no more production" and then "do more production") the move is a complete upheaval of the branch dynamics and creates a conflict between the BOM and the reps in his office.

Brokers like having a non-producing manager because it removes a number of conflicts. Putting non-producing managers into production creates those conflicts, and will undoubtedly increase costs in the long run, as staffing needs to be increased, and brokers feel the effects of the newly created conflicts.

Check out the full article at Registered Rep.

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