Business

Small brokerages getting bumped by Wall Street’s big banks

Wall Street’s big banks are squeezing financial advisers and their clients out, industry veterans are saying.

Dozens of these advisers are attempting to organize a nationwide protest movement against one of the industry’s most iconic discount brokers, Charles Schwab.

The protesters, led by Michael Kelly, an outspoken former Schwab registered investment adviser, accuses Schwab of engaging in “questionable” and “unfair” employee terminations, driven by unbridled greed. Some of this group demonstrated outside a high-profile Schwab conference this month in Washington, DC, holding a sign outside that read: “Charles Schwab: Learn the Truth About How They Terminate.”

It was a p.r. nightmare for Schwab, say observers. Some 1,500 advisers and top-tier management attended this conference.

“They only do this to the small guys, by the way,” Kelly told The Post, referring to his termination by Schwab.

Kelly, who had $14 million in assets under management, runs a company out of Thousand Oaks, Calif., called Airgead Clann (Irish for “money family”).

“They don’t do this to the big boys. Anyone with over $100 million in assets under management is not going to get this treatment, because you make more money for Schwab,” he said.

Kelly’s rebel forces are not alone.

The Street’s big banks have often relentlessly raised the bar for their advisers and clients.

“The game plan is to get rid of the underperforming advisers,” said David Alsup, founder of consulting firm Fishbowl Strategies.

Last year, Bank of America raised eyebrows when it crossed a new threshold: It jacked up the minimum account size for its Merrill Lynch clients from $100,000 to $250,000.

This past summer, BofA announced fee hikes for clients; insiders said some clients could see fees jump by as much as 50 percent.

Wall Street’s brokerage titans are crushing the small guys all over, industry execs tell The Post. And it’s hurting mom-and-pop investors, because they may soon have no financial advisers to call their own if the trend continues, these execs warn.

Big, profit-crazed brokerages are eyeing the ultra-wealthy 1 percent, they contend. They play hardball with small firms that service the 99 percent — and fire advisers who don’t reel in lots of the upmarket, multimillion-dollar business.

“The big firms like Goldman Sachs, Merrill Lynch and JPMorgan don’t want the small firms — and they don’t want small investors,” David Sobel, who chairs the small-firms advisory board at industry regulator FINRA, told The Post.

Sobel, who’s also general counsel and chief compliance officer for Abel/Noser in New York, added: “What’s going to happen to the small account? A $50,000 account for Goldman Sachs is not worth bothering with.”

The number of small brokerages and their advisers welcoming small accounts is dwindling because the increasing cost of running and capitalizing their businesses is squeezing them out, analysts say.

The consequences? Sobel said that many small investors who prefer the human interaction and the professional advice of an adviser will be forced reluctantly to online investing, which may not be suited to them.

“The small investor will start investing on his own, on E*Trade, on the Web. What else is he going to do?”

Sobel says. “Is this serious? Absolutely.”

Despite the Dow Jones industrial average’s breathtaking ascent since the 2008 financial crisis, the number of brokerage firms counted by FINRA has plunged. It’s down from nearly 4,900 to 4,195 today. The industry also lost almost 35,000 “registered reps,” as advisers are sometimes called.

Sobel noted that five years ago there were about 4,500 small brokerages; today there are about 3,820.