Bank of America plans to rebuild its brokerage force in 2010 by adding rookie advisors rather than competing for talent in the industry’s expensive recruiting war. A story in the Financial Times Tuesday, citing unnamed sources, said Bank of America plans to add 2,000 new brokers in 2010, mostly trainees.
Registered Rep. wrote about the return of rookie training programs at the big wirehouse firms in our January issue. In that story, Darin Manis, CEO of recruiting firm, RJ & Makay, estimated that Merrill and Morgan Stanley Smith Barney would each recruit at least 2,000 trainees this year. Makes sense in an industry where the average age is mid-50s, and signing bonuses for the best in the business have reached up to 300 percent of trailing 12 months production.
But there are other good reasons for it too: Merrill may feel it needs the heft to keep up with rival Morgan Stanley Smith Barney, and it may need new hires to make cross-selling with Bank of America work.
Merrill’s thundering herd shrank to 15,000 by summer of last year, down from 18,000 in the fall of 2008, as some advisors left for other Wall Street firms or independent b/ds and RIAs, and other less productive advisors were encouraged to leave with changes to pay and incentives. The firm’s closest rival, Morgan Stanley Smith Barney, has over 18,000 advisors and CEO James Gorman laid out aggressive plans for the firm at a conference Tuesday, promising to reel in $20 billion in net new retail client assets in 2010 and $50 billion in 2011, quite a turnaround from net outflows of $13 billion in 2009.
Meanwhile, some top Merrill advisors have resisted using Bank of America products. “Merrill has a more imminent need than other firms,” to create an aggressive training program, says Aite Group analyst Alois Pirker. The cross-selling effort “requires a lot of manpower, dedicated manpower, and I have hard time seeing legacy Merrill brokers going to the BofA banking side. That’s where some of them might fit.”
For Merrill advisors how much impact the aggressive hiring effort has will depend on where they sit, Pirker says. “Obviously, it’s kind of fresh, brokers coming in the door and trying to push up the hierarchy. For established brokers it doesn’t make much difference. For the lower ranking ones, there’s more competition coming in.”
Merrill spokeswoman Selena Morris couldn’t comment on the veracity of the FT’s story, but she did confirm that Merrill is focusing hiring on its training program. “We look to add quality advisors and bankers, in particular through our training program.” Morris also said the bulk of Merrill’s business investments “are in capabilities for clients and existing advisors.”
Pirker says that in order for the Bank of America-Merrill combination to work in a “scalable” way, the firm will have to pair its bank-brokerage unit with online brokerage capabilities and call center-based brokers. It already has some of each, but will have to build these out. “The first was cut back at the beginning of the integration with Bank of America, the other two aspects are relatively new territory for Merrill as its core clientele has traditionally been served through a high-touch advice model. Ms. Krawcheck's experience from Citi will come in handy in this difficult endeavor,” he writes in a note.