Washington Wealth Management, a start-up that is expanding nationwide by poaching Wall Street brokers and managers, on Wednesday said it hired three Morgan Stanley Smith Barney producers and opened offices near Las Vegas and San Diego.

The year-old Middleburg, Virginia, firm will end 2011 with a network of 25 advisers and managers in five cities with a combined $1 billion in client assets.

President John Simmons told Reuters he expects the firm to expand four-fold to $4 billion in assets and 10 offices by the end of next year.

To achieve critical mass, we said we needed advisers who could generate $40 million of revenue. The advisers in our current pipeline of potential recruits, people with whom we are having intensive conversations, are generating $250 million, said Simmons, a former Morgan Stanley Smith Barney manager who joined Washington Wealth in May.

For its new office near Las Vegas, Washington Wealth hired husband-and-wife team Mitchell and Jessica Horst from Morgan Stanley Smith Barney, where they generated $550,000 a year in revenue.

The firm also opened an office covering wealthy towns north of San Diego, led by newly hired David Allen, a producing manager from Morgan Stanley Smith Barney's Rancho Santa Fe, California, branch.


Washington's strategy is built around branch managers, a group of people who generally do not produce revenue and have been winnowed out by brokerages eager to reduce expenses.

The firm believes veteran managers can recruit top advisers and attract clients in their respective markets. While Washington Wealth is a registered investment adviser earning fees based on assets managed, its brokers also can continue to earn commissions on transactions.

Washington Wealth is among a growing number of firms targeting big-firm brokers who want independence but are not keen on the headaches of managing their own practice. It is a twist on the breakaway broker trend that drained thousands of advisers and billions in assets from banks in recent years.

Advisers who move to the start-up, founded by former Morgan Stanley complex manager Tony Sirianni, and receive a higher percentage of their fees and commissions -- about 70 percent -- than what they would receive at most Wall Street brokerage houses. They also get equity in the new firm, which has earmarked 30 percent of the equity shares for brokers and managers.

Morgan Stanley Smith Barney is the largest U.S. brokerage, a joint venture formed in 2009 by Morgan Stanley and Citigroup's (C.N) Smith Barney.