Janney: Growing by Poking at Giantsreprinted from Barron's
The wealth manager is poaching top talent from big names like Merrill Lynch, Morgan Stanley, and UBS.
Janney Montgomery Scott is a medium-size broker-dealer whose roots trace back to 1832. It once held the second-oldest seat on the New York Stock Exchange. Now owned by Penn Mutual Life Insurance, Janney is suddenly pushing hard into private-client services.
Five years ago, 42% of its revenue came from fiduciary private-client services (its fee-based advisory business). Today, those services account for 64% of Janney’s total revenue. According to the president of the Private Client Group, career employee Jerry Lombard, private clients could account for 75% of total revenue within the next five years. “We are shedding the image of a regional firm, and people are starting to recognize that you can be an organization of our size and deliver the same services as much larger firms,” he says.
Not everyone is convinced. According to the most recent Barron’s Penta Top 40 Wealth Management Firms survey (Sept. 17, 2016), Janney has $16.1 billion in accounts of more than $5 million, just squeaking in at 38th on our list. The accounts are concentrated on the Eastern seaboard from Portland, Maine, to Fort Lauderdale, Fla., and in the eastern part of the Midwest. Doug Black, founder of wealth-advisory firm SpringReef, notes that “wanting to be bigger and being bigger are two different things. You can make yourself seem bigger in the marketplace, but it’s a long and expensive process. You can go on a recruiting binge and get a bunch of new advisors into your firm, but then you need to build resources on top of that.”
At this stage, Lombard is determinedly poaching top talent from big names like Merrill Lynch, Morgan Stanley, UBS, and Wells Fargo. That push is making Janney Montgomery Scott the third-biggest recruiter of its size in the industry, according to a 2016 benchmark study by McLagan, a financial-services research firm.
Lombard has added 100 new recruits in all areas in the past three years and now has a total of 762 rainmaking advisors. He plans to have 900 advisors in another five years.
The result? Lombard says assets under management in his private-client business increased 28%, and revenue rose 26%, during the past year. Newly hired advisors have brought in half of this new business. The other half comes from converting Janney’s broker-dealer customers into fee-based private clients demanding more-sophisticated wealth services.
Lombard’s selling point to the new recruits: Janney has a longstanding, stable model that offers the advantages of scale with a boutique feel that allows for a more personal touch than can be found at bigger firms. “When they come here, they’re not missing a beat,” he says, “and maybe even finding something they didn’t have before.”
He’s also conscious of the rising millennial generation, poaching eight 20- and 30-something rising-star advisors this year. Like everyone else, Lombard is trying to keep clients’ children content so they stay at his firm when the inheritance finally is transferred.
One client came to Janney Montgomery Scott in 2015 with just over $1 million. A few months ago, he received a windfall in excess of $10 million after a business deal closed. He was worried about whether he had enough of a cushion to pay his taxes on the money. Within a few days, his eight assigned financial and estate-planning advisors had drawn up several asset-allocation and retirement strategies, offering more upside potential and providing the liquid buffer he needed to feel comfortable.
He kept his money at Janney, claims Lombard, because it was the same quality service he received when he first joined the firm. That’s an uncommon level of service at big wirehouses “until you’re up into the $10-million-plus range,” he says.
The unit appears to be doing something right. According to a recent client-satisfaction survey commissioned by the firm, 66% of the private clients were “likely” or “extremely likely” to refer others to Janney, and 87% rated their advisor satisfaction as “excellent” or “very good.” “Our size keeps us very close to our clients, and they seem very satisfied by it, so that’s where we get our organic growth from,” Lombard says.
Right now, Lombard’s fee-paying private-client business makes up 12% of parent Penn Mutual’s total revenue. He plans to increase that to 15% in the next five years. It’s a tall order, but not an impossible goal, based on the firm’s recent success.
Original article: Janney: Growing by Poking at Giants