In what may be the biggest breakaway deal on record, a 50-advisor team managing around $129 billion in assets has left Merrill Lynch to start their own RIA in Atlanta.
The team had been the core of Merrill’s Global Corporate and Institutional Advisory Services, which included 90 advisors serving primarily corporate retirement and benefit plans for Fortune 1000 companies. It was a substantial practice founded over two decades ago by a retired Merrill advisor James Wallace.
The breakaway team is led by Merrill lifers Erik Bjerke, Jeffrey K Crowell and James R. Kaufman. They are calling their new firm OpenArc and have taken an investment reportedly worth around $90 million from Dynasty Financial Partners and custodied at Schwab Advisor Services.
The move is perhaps the strongest example yet that the RIA space and technology have evolved to serve even the largest and most sophisticated institutional practices. The idea that independence was for mom-and-pop shops with mass affluent clients is a myth. While wirehouses still have their strengths, the largest and most sophisticated teams in the industry now recognize that their practice is worth more outside of a captive wirehouse.
The Schwab custody relationship creates cross-selling opportunities, potentially funneling executives from Schwab’s stock option franchise into advisory relationships with OpenArc. This dual-platform approach allows OpenArc to deliver independent advice on both corporate benefit plans and serve those company executives.
Dynasty, a pioneer in supported independence, is giving them the capital and infrastructure to ensure that they can transition seamlessly and not lose sight of client service and account transfers. Dynasty is also planning to use its investment bank to help the team expand their empire by finding M&A opportunities.
Importantly, the team’s move shows how wirehouse groups have evolved to become self-sufficient. They’re large enough to operate on their own and had become a mini-empire within Merrill. They realized that they had all the tools they needed to work independently without having to sacrifice half of their revenue, and they found partners that are willing to invest to ensure their interests are aligned.
As the name implies, it also shows that they feel their sophisticated clients are better served with the open architecture of the RIA world. The team is now free to shop the street for the best rates on loans, find better-performing or lower cost products and alternatives and seek out the best managers to oversee their clients’ accounts.
Merrill, perhaps unsurprisingly, is fighting back. On the same day that the team left in September, the wirehouse filed a lawsuit claiming it was the victim of a corporate raid. The wirehouse named a dozen of the team’s advisors as well as their custodian, Charles Schwab Corp., and their backer and service provider Dynasty Financial Partners.
It said the team used “misinformation and strong-arm tactics” to poach all 170 GCIAS advisors and support staff in violation of employment contracts. It also claimed they misappropriated trade secrets and client information and violated the Protocol for Broker Recruiting.
Merrill quickly lost this TRO complaint further proving that the message is clear- major firms’ inability to stop the tide of independence.
As the Editor of The Gershman Group, a boutique financial services consulting firm, TGG brings expertise in financial analysis, strategic planning, and market research. With a keen eye for detail and a passion for helping businesses navigate complex financial landscapes, TGG delivers insightful, high-quality content to empower informed decisions. Backed by years of industry experience, TGG makes complex topics accessible through clear and compelling communication, shaping the firm’s thought leadership and commitment to excellence in financial services.
