The Day Everything Changed at Alex. Brown

Alex Brown, formed in 1800, is the oldest and one of the best investment banks in America – a relatively small house that, what it lacked in diversity and reach more than made up for in service, knowledge, and attention to detail. That was the boutique firm that Deutsche Bank bought in 1999, and the same one (that had since begun specializing in technology investments) it operated through the highs and lows of the hyperbolic ‘90s tech bubble.

Then, in 2016, some seventeen years after that bubble spectacularly burst, Deutsche Bank sold its now re-named “Deutsche Bank Advisors” to Raymond James.

To its credit, Raymond James – an efficient, well-run company with a broad and diversified platform – then pulled the name “Alex. Brown” out of mothballs and used it to rebrand its shiny new toy.

It was a smart move, at least in theory. It just wasn’t the right one, yet again. For the last 25 years the name has had multiple owners from Bankers Trust, to Deutsch Bank, to now Raymond James.

While many in the industry – advisors and clients alike – continued to hold the name Alex. Brown in high regard for how the original company operated, others tended to associate it with the emotional roller coaster of the tech-obsessed ‘90s.

What’s more, internally the marriage of cultures turned out to be a veritable sh*t show, as many of Deutsche Bank’s best and most experienced advisors – the ones with the greatest books and highest net worth clients – often felt like fish out of water.  After all, RayJay carved out its niche as a firm whose management, for all its differentiated and diversified platforms, always focused the bulk of its energies on the mid-level/$500K producer and average net-worth client.

This clash of cultures happened, sadly, even though the guy shepherding the integration for RayJay was, for lack of a better term, a real “advisors’ manager.” Haig Airyan, a brilliant, solid guy, was zealously protective of the advisors under his watch. As their voice and conscience in the boardroom, he had an almost savant-like ability to stand in their shoes, see the world through their eyes, and make decisions that kept them happy, motivated, and productive.

As a result, loyalty to him – especially among those with the most skin in the game; those with the highest net-worth clients and most muscular books – was almost incalculable.

So, when it was announced in June that Airyan would be leaving Raymond James’s Alex. Brown division the following month to “pursue interests outside the company,” the news sent shock waves through the company’s advisors.

That’s why a few of the highest producers have left Alex Brown and it is expected many more to come. Most will pursue one of three options: a similarly sized boutique shop, much like the old Deutsche Bank had been before the merger, a large multinational firm or bank with a more competitive platform since some are tired of boutiques, or a chance to break away and finally hang out their own shingle and operate as an independent.

Leaving Alex. Brown has been a tough choice for many advisors, even the ones with the best books, as RayJay continues to have a good offer and provide a measure of security. Yet, many will surely continue to leave particularly when the 7-year deal is up next Sept 2023.

Why? Three reasons.

One, because Deutsche advisors and others like them are used to servicing UHNW clients who demand sophisticated solutions to complex challenges such as creative lending, value add alternatives or need a Capital Markets centric bank to deliver solutions.

Two, because Airyan will reemerge with an independent option that is highly competitive with the current landscape.

And three, because now, without their guardian leader speaking their language and voicing their concerns, many have decided that their books (and clients’ interests) would be best served – and most valued – elsewhere.

Considering this, the question must now be asked: As legacy advisors depart, as more management departs, and since they haven’t successfully recruited making the unit less and less profitable, will Alex Brown even be around as this decade starts to draw to a close?

To that end, The Gershman Group sponsored an independent study to take the pulse of Brown’s remaining advisors.  I’ll spare you all the gory details and suggest, instead, you focus on just two of the findings: nearly half those polled (48%) report they would consider shopping around for a new company, and only roughly one out of every three advisors (32%) believe his or her company will even be around in ten years.

So, again, I ask: Can Alex. Brown survives its ongoing culture clash/talent drain?

Smart money – and those on the inside – say don’t bet on it.