The run on First Republic Bank driven by clients’ fears has left financial advisors in quite a quandary. Many advisors are shell shocked by what’s happened and are in a state of confusion about the decision to stay or go. One group clearly has decided to be on the go, some have already departed, and others are assessing their options with the assistance of recruiters. The other group remains at FRB hoping and praying for the best yet fearing the worst.
FRB has pushed back its earnings announcement until after market close on April 24th and many advisors are hoping for an announcement, but few have ideas about what. Who knows what this will bring as the rumor is the firm is $10 billion in the hole, the balance sheet might be better than what it was weeks ago, but how will that change the outlook for the private wealth group? What if it is really bad news, will there be a run on the bank again, and will the stock crater? We’ll soon find out.
Advisors looking for better news tuned into FRB’s President, Bob Thornton’s companywide call that one advisor referred to as a “nothing burger” – that only 3% of assets have left the firm, there are hopes to retain the ballast, but unfortunately this came with no enthusiasm, encouragement or indications on what the course to success might be. Advisors stated Thornton fell far short of the informative details they expected given the current situation, not to mention leadership.
Keep in mind that advisors could have come to FRB only in the last six months, to the last 1-4 years, and were given major money to come on board. These advisors most often left big firm culture and politics for boutique which they had in spades at FRB. Advisors made their hurdles and the firm was very good to them. To think of having to leave and pay back any of the sign-on monies to go to a firm where they don’t like the culture and people is truly out of this world. The culture at FRB allowed advisors to thrive and in turn, clients benefitted by stellar service and private banking options.
But as more advisors and assets leave, the balance sheet of the private bank continues to disintegrate, leaving the firm more and more vulnerable. On top, since it was clients that acted in fear in the first place, advisors continue to have to manage client fears and expectations. Advisors choosing to remain at FRB are purely looking at a point of diminishing returns as advisors and assets depart the firm in rapid succession. While true that either option to stay or to go isn’t rosy, the facts are advisors must cut through the cloud of confusion to map their best course and truly hope for the best.