Turmoil and turnover are continuing at Toronto-based CIBC Wood Gundy, with the latest departure being veteran Frank Tucci, head of product support and marketing.

Tucci, who was escorted from the investment dealer’s downtown Toronto headquarters, is spending some time with his family at his Muskoka cottage, taking a break to consider his next move.

But, as dramatic as Tucci’s exit was, his departure is only one more instance of the steady exodus of executives and investment advisors — be it willing or unwilling — that has thinned the ranks at the beleaguered firm in recent years. And the turbulence shows no signs of abating.

Tucci can take heart, however. The word among several observers at competing firms as well as among defectors from Wood Gundy is that Tucci will be better off elsewhere than in the oppressive culture at his former firm. Many Wood Gundy alumni are finding happier lodgings with entrepreneurial shops such as Blackmont Capital Inc., GMP Private Client LP, Raymond James Ltd. and Richardson Part-ners Financial Ltd., as well as with competing bank-owned firms.

Some departees, including Bruce Kagan, president of Blackmont in Toronto, and Randy Ambrosie, president of Toronto-based AGF Funds Inc., have gone on to make valuable contributions elsewhere.

Tucci is unable to comment to Investment Executive until matters are more settled between him and his former employer. Tom Monahan, chairman and CEO of Wood Gundy, was not available; Rob McLeod, Wood Gundy’s director of external communications, would only confirm that Tucci had left the company.

The troubles at Wood Gundy are not new, and many say they go back as far as parent CIBC’s takeover of Merrill Lynch Canada Inc. in the fall of 2001. At the time, the bank offered major bonuses to retain Merrill Lynch staff as the brokerage was rolled in with Wood Gundy, CIBC’s brokerage arm. Advisors already at Wood Gundy were offered no such incentives, stirring the flames of resentment.

Tucci — who is described by a former long-time co-worker as “a first-class guy, creative and hard-working” — was one of the many who came from Merrill Lynch. He has a long record of service with the Canadian arm of the New York-based brokerage.

After the takeover, many former Merrill Lynch advisors bristled under CIBC’s ownership. Some of those who have left describe the culture at Wood Gundy as a highly political and toxic environment, with a “cover your ass” mentality and a stifling bureaucracy.

Retention bonuses and share participation programs were implemented to hang on to staff. But they have not been enough to retain many advisors, who walked away from these generous financial incentives.

One former Wood Gundy advisor says he began to feel like a “prostitute,” being paid to stay at a job that was becoming increasingly unpleasant. The turnover has been high, he says, from the level of top producers down to the bottom rung of administrative staff. He suspects that the defections among back-office staff have contributed to a high degree of administrative incompetence and an unprecedented number of embarrassing paperwork foul-ups that have had to be explained to clients.

Advisors who have left the firm also mention a lack of training and advancement opportunities for brokers, and an environment that stifles entrepreneurship and initiative. Some say the firm’s technology has created difficulties accessing client information. Some advisors feel they were falling behind the curve, in terms of having the tools and support they need to serve clients.

In April 2005, CIBC brought in Victor Dodig to head up CIBC Asset Management, the revamped wealth-management division under which Wood Gundy operates. Although there were high hopes that Dodig would be a positive influence, there’s a feeling of “where’s the beef?” says one industry observer. Meanwhile, there are complaints that cronyism is behind the rise of various executives through the ranks.

Favouritism and a lack of team spirit are further dampening already low morale. One observer says a “bunker” mentality has developed at Wood Gundy that is defensive rather than proactive. If something negative happens, he says, the investment dealer is more likely to attack it or take draconian measures to prevent further problems rather than try to turn things around in a positive manner.

As well, advisors live in fear of having their books “butchered” if they leave the firm, and of engaging in ugly tugs-of-war over clients. Those who have left say it has cost them money to get out of the firm but feel it was worth the price.

@page_break@Although the brokerage arm has problems of its own, it has also been tarnished by a series of missteps at the parent bank, the most recent being CIBC’s disastrous foray into the U.S. subprime mortgage market. In the six months ended April 30, the first half of CIBC’s 2008 fiscal year, the bank took $4 billion in charges related to asset-backed commercial paper — $1.7 billion in the most recent quarter and $2.3 billion in the previous quarter. The result was a net loss of $1.1 billion for the half. At the end of its second quarter, CIBC still reported $3.4 billion in unhedged exposure to structured credits.

Other blunders in recent years include CIBC’s costly involvement with Enron Corp. and the misdirection of faxes with confidential client information to a scrapyard operator in West Virginia. These incidents created negative publicity and caused concerns on the part of Wood Gundy clients. Advisors feel they are constantly having to explain problems, soothe clients and pour oil over troubled waters.

Certainly, IE’s 2008 Brokerage Report Card, published in May, would support this. The random survey of Wood Gundy advisors saw ratings take a tumble. Although several other firms rated higher than a year ago as management took action on advisors’ past complaints, Wood Gundy advi-sors spoke of being embarrassed to work at the dealer, and complained of ineffectual leadership, unresponsiveness to complaints and a lack of vision.

Wood Gundy advisors gave their firm a score of 5.3 out of a possible 10 in public image, down sharply by 2.4 points from 7.7 in the 2007 survey. The advisors surveyed also gave their dealer a 7.1 in stability, down 1.3 points from 8.4 in 2007. Scores for strategic focus and corporate culture were also down by more than 1.5 points from the previous year, and there were negative comments about the firm’s leadership.

But this is hardly news. As far back as two years ago, IE’s 2006 Brokerage Report Card showed that Wood Gundy advisors were complaining about management’s inability to articulate its vision, with comments that strategic focus seemed to be constantly shifting. The firm was a laggard compared with its peers then, as well.

CIBC and Wood Gundy have challenges ahead. The big question is whether the firms will address their issues — or let the bunker mentality take over. IE