Report: Merrill Offers Big Bonuses to Entice Top Talent
Merrill Lynch is giving some regional managers permission to offer unusually high upfront signing bonuses to attract top-tier brokers from rivals, according to several recruiters.
The second-largest brokerage firm is sweetening elements of a scheme unveiled in January, according to the recruiters who spoke on condition of anonymity.
Merrill's offer, which is likely to be offered to a few dozen brokers, illustrates how difficult it has become to lure stars who have been locked into place through retention packages that pay bonuses over seven years or longer.
"There is flexibility on deals for the best of the best," said a recruiter briefed on the recruiting plan.
"Now managers don't have to ask for an exception."
A spokeswoman at Bank of America, the parent of Merrill Lynch, declined to comment.Terms of the deal are complex, as is often the case with payout grids and recruiting packages.
Top-echelon brokers can receive 150 percent of the fees and commissions they generated over the previous 12 months, supplemented by an additional 15 percent if they have attained certain professional designations such as the Certified Financial Planner Board of Standards' CFP certification.
The aggressive package is well above the recent norm of 125 percent of trailing 12-month revenue in upfront cash, the recruiters said. The supplement is not new, but it has been standardized and put in writing for the first time, they said.
On the back end, brokers can get 200 percent of their annual production -- split evenly between cash and stock -- starting after 18 months. Balances would be paid out over the following five years as brokers hit targets for bringing in new client assets. The payouts are not capped.
The benchmarks are similar to those outlined in January, but Merrill has extended the deadline for meeting the first asset-gathering hurdle to 18 months, 50 percent longer than in the initial scheme.
The deadline for brokers to expand their starting books of business by half as many assets has been extended under the new plan to six-and-a-half years.
To collect the full amount of deferred pay, brokers must remain at Merrill for nine years.
Managers are also authorized to make offers to "second quintile" brokers at rival firms, with a maximum up-front bonus of 140 percent of trailing 12-month revenue in additionto the certification supplements. Back-end payments for this tier are capped at 350 percent of a broker's trailing-year revenue at the former firm, a recruiter said.
Bank of America on Friday unveiled first-quarter earnings that were below expectations, but bolstered by contributions from Merrill Lynch.
Brian Moynihan, chief executive of the bank company, has publicly expressed disappointment with Merrill's recruiting performance in 2010. The broker-dealer this year has articulated an ambitious plan to expand its brokerage force by a net 8 percent in 2011, or more than 1,200 brokers.
In the first quarter, Merrill added 184 advisers, bringing its brokerage force to 15,695, the bank said Friday. That's down from 16,690 that Merrill boasted in September 2008 when it agreed in the depths of the financial crisis to sell itself to Bank of America.
Morgan Stanley Smith Barney is now the number one broker, with more than 18,000 retail advisers.
(Reporting by Joseph A. Giannone, editing by Jed Horowitz)
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