Merrill Retention Is Adequate for Top Dogs, Scanty for Lower-Tier Producers

The long-awaited Merrill Lynch retention package has arrived. Not surprisingly, top producers will probably be pleased, but others may not. The long-awaited Merrill Lynch retention package has arrived. Not surprisingly, top producers will probably be pleased, but others may not.According to a source familiar with the deal, payments will be made on a sliding scale, with Merrill FAs who generated $1 million in production 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.

The long-awaited Merrill Lynch retention package has arrived. Not surprisingly, top producers will probably be pleased, but others may not.

According to a source familiar with the deal, payments will be made on a sliding scale, with Merrill FAs who generated $1 million in production 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 3 years. For reps producing $1 to $1.75 million, the package includes 75 percent in cash upfront, but the other 25 percent will be based on growth in production over a three-year period.

For the rest of Merrill advisors, the package ranges from a total of 75 percent of trailing 12 to 20 percent. Advisors producing $750,000 to just under $1 million will get 50 percent upfront cash, taxable over 7 years, and 25 percent on growth in production over three years, while 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.

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. Will the Merrill package be enough for FAs when their deferred comp packages have been flattened by plummeting Merrill stock, and when some wirehouse firms are still offering fat recruiting packages?

"What happens is that everybody who makes $499,000 to $1 million is now in play," says an advisor who generates $750,000 in production. "The message being sent is bankers versus brokers. Commercial bankers don't understand what advisors do. At other firms, a guy who makes $750,000 to $800,000 is valued by the firm."

Robert McCann, president of the global private client group, has told managers in recent weeks that the intended result of the package was to “build a wall around the top two-thirds of production.”

An executive at a competing firm was quick to offer judgement on the numbers: “This will engender a great deal of disappointment among their FAs,” he says.

"In the context of extraordinary change in financial services and a volatile market and economic environment, it is important for clients, shareholders and the future of the combined company to retain top-performing advisors at the two current firms,” said Robert McCann, vice chairman and president, Global Wealth Management at Merrill Lynch in a statement. “This transition award, which is fully realized over multiple years, will help ensure that clients receive thoughtful advice, guidance and world-class service from the financial advisors they have chosen and trust, and that the full long-term value of this combination is realized.”

"This program is about helping Main Street clients navigate the most volatile markets we’ve seen in decades,” said Keith Banks, president of Bank of America’s Global Wealth & Investment Management division. “That’s the role of these advisors in the local communities where they too live and work. That’s the commitment of our company now and going forward and the reason we plan to combine these two great firms.”

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