Merrill Lynch confirmed that 6,200 advisors, or about 37 percent of all Merrill financial advisors, signed a retention agreement from new parent company Bank of America by 4 p.m. on Friday. But Merrill says that only about half of the firm's nearly 17,000 advisors were eligible in the first place, and that they are responsible for about 75 percent of the firm's production. Almost 95 percent of these eligible advisors signed. Of the absolute best at the firm—those producing annual revenue of $1.75 billion or more—99 percent signed the agreement.
Some Merrill advisors had been concerned about language in the agreement that suggested that Bank of America had full ownership over Merrill advisors’ clients. Bank of America subsequently offered to join the Broker Protocol and sent a memo to advisors saying as much. The bank has not yet confirmed whether it has actually signed the protocol or not. Meanwhile, many Merrill advisors generating less than $1 million in production were unhappy with the package offered by BofA because they felt they deserved more cash.
"I live and work in this town," says one big producer, who signed the agreement. "I planned on staying anyway. They’re going to pay me to stay. What are my choices?" He noted that one large team in his office just accepted an offer from UBS for 260 percent of trailing twelve months production, with half of it upfront, he says. But he predicts that they will probably lose about 40 percent of their book in the move. And how will they explain the move to their clients, he asks.
Bank of America, which agreed to acquire Merrill Lynch in September, offered payments to Merrill advisors on a sliding scale, with Merrill FAs generating $1 million in production or more over the last 12 months, getting a forgivable loan equal to 100 percent of their previous 12 months’ production figure in upfront cash and deferred bonus.
Those reps producing over $1.75 million will get 75 percent in upfront cash, taxable over 7 years, and another 25 percent in deferred bonus over three years. For reps producing $1 million to $1.75 million, the package includes 75 percent in cash upfront, and another 25 percent based on growth in production over a three-year period.
For lower-producing Merrill advisors, the offers range from a total of 75 percent of trailing 12, to 20 percent of future growth. Advisors producing $750,000 to just under $1 million will get 50 percent upfront cash over 7 years and 25 percent on growth in production over three years; those producing $500,000 to $750,000 will get 25 percent cash over 7 years and 25 percent on growth. For advisors producing $250,000 to $499,000, the deal includes just 20 percent on production growth in deferred cash over three years. (On average, Merrill reports that its advisors produce $767,000 in revenue a year.)
The Merrill deal is in line with what Wachovia paid to A.G. Edwards reps after that firm was acquired, but it is less than what Bear Stearns advisors got: There, reps producing $500,000 or more got 100 percent.