ML- Paybacks are a B1TCH!

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Jun 13, 2006 9:19 am

I understand the need to have a contract to repay the costs of training but when do the costs become excessive?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


 


I was given an “Agreement to Repay Costs of Training” letter to sign.  While I have no intention to leave ML, I don’t like the feeling of being an indentured servant.  The ML contract requires that I stay 32-months (8-months pre=production + 24-months production) in order to leave without needing to repay costs of training.  Any service period less than 20-months requires repayment of $38K and any service over 20-months but under 32-months requires $19K.  Aren’t these payback amounts and timeframes excessive?  How binding are these contracts?  My experience would indicate that they don’t stand up well in court


 


The contract says that they can even go after me for repayment should I be terminated.  Does anyone know of a case where their office actually pursued repayment for any causes?


 


WM

Jun 13, 2006 9:22 am

if you're in this biz for the long term and fully committed sign the agreement and move on. thirty-two months at ML won't hurt you.

Jun 13, 2006 10:22 am

The typical cost to bring in someone new and train them is about $100,000 (home office allocations, computer, office space, travel to NJ, et.).  The breakeven for a 'rookie' who is successful is about six years.  The firm will go after your contracted dollar amount if you go work for another firm within their timeframe stated on the contract (even if you're terminated).  However, leagally - it's tough to justify to a court that they fired you and now want you to pay them training costs. 

Jun 13, 2006 10:56 am
WealthManager:

I understand the need to have a contract to repay the costs of training but when do the costs become excessive?<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />



I was given an “Agreement to Repay Costs of Training” letter to sign.  While I have no intention to leave ML, I don’t like the feeling of being an indentured servant.  The ML contract requires that I stay 32-months (8-months pre=production + 24-months production) in order to leave without needing to repay costs of training.  Any service period less than 20-months requires repayment of $38K and any service over 20-months but under 32-months requires $19K.  Aren’t these payback amounts and timeframes excessive?  How binding are these contracts?  My experience would indicate that they don’t stand up well in court



The contract says that they can even go after me for repayment should I be terminated.  Does anyone know of a case where their office actually pursued repayment for any causes?



WM



Let me see if I have this right.  You've been offered a position with the world's premier wirehouse and you're worrying about your obligations when you quit?


Where do you plan to go from Merrill, SW Bach?

Jun 13, 2006 11:01 am
apprentice:

The breakeven for a 'rookie' who is successful is about six years.  


How do you figure that?  They're keeping the lion's share of any revenue you bring in.  A successful rookie will have graduated the program and will have at least $15mm AUM at graduation, probably making the company well over that $100k (even after paying the rep their salary and any bonuses, commissions).

Jun 13, 2006 11:04 am
STL Indy:
apprentice:

The breakeven for a 'rookie' who is successful is about six years.  


How do you figure that?  They're keeping the lion's share of any revenue you bring in.  A successful rookie will have graduated the program and will have at least $15mm AUM at graduation, probably making the company well over that $100k (even after paying the rep their salary and any bonuses, commissions).



There is more to the compensation package salary, bonus and commission.


Jun 13, 2006 1:58 pm

Thanks BEF - there's a lot more to the comp.  Besides - if you're doing less than $250,000 gross, you're a liability to the firm.  It's when you begin to do over the $250,000 that you actually begin to be profitable.  Pareto says 80/20 - 20% of the brokers actually make money for your firm.  Assets don't pay the bills - gross production does.  If you have $50 million in assets and only produce $100k in gross - you're warehousing.  A successfull 'Trainee' should be producing above $250,000 by the end of year four - otherwise, you're just pretending.

Jun 13, 2006 3:26 pm
Big Easy Flood:

Let me see if I have this right.  You've been offered a position with the world's premier wirehouse and you're worrying about your obligations when you quit?

Where do you plan to go from Merrill, SW Bach?


I'm not planning on quitting but I've heard that the success rate is around 10%.  Also if after a year or so of production I decide that a wirehouse isn't the right fit for me I want to keep my options open at investment banks such as JPM, GS and BS.


Jun 13, 2006 6:53 pm
WealthManager:

I'm not planning on quitting but I've heard that the success rate is around 10%.  Also if after a year or so of production I decide that a wirehouse isn't the right fit for me I want to keep my options open at investment banks such as JPM, GS and BS.



Ah, confidence born of ignorance of the realities.


If you're making it at Merrill you won't be intersted in changing to JPM, GS or BS.


On the other hand, if you're not making it at Merrill you won't even get an interview at places like JPM, GS or BS.  Oh you might get an initial interview by some HR type, but when you're asked about your numbers at ML and they're not so very good the curtain will close.


You know something.  If you have what it takes to go work at JPM, GS--BS is not that selective--and you think that's your ultimate goal, why not just go there now?


If you can't cut it at Goldman today why do you think they'll be interested in a year or two?  What's going to change?

Jun 13, 2006 7:02 pm

The subscription for your terminal alone is about $1,000 per
month.  If have $15 mil under mgt at 1% at the end of 2 years,
thats $150,000 in production going forward.  From that you have to
take your salary, say $50 grand (X2 years).  Then there is the
$24K for the use of the computer.  There is the cost of the
computer itself, but that can be recycled and capitalized, as can the
office space.  But the phone bill and mail costs are hard
dollars.  Then they have to shell out the quarterly bonuses to
you, and possibly stock if you do well.  If you get out within 24
months and may back the $38k...believe me, you were still a very big
losing experience to Mother.

Jun 13, 2006 11:01 pm

In situations when the trainee shows some signs that he will succeed in the business and another firm tries to headhunt him (for example in month 12 of production), the hiring B/D usually pays the legal costs and or penalties????


Can someone confirm this??

Jun 13, 2006 11:12 pm

Big Easy Flood:

If you can't cut it at Goldman today why do you think they'll be interested in a year or two?  What's going to change?

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


It's not that I can't cut it.  It's that I missed the new MBA hiring cycles.  The MBA program I am/was in (finishing this weekend) is for working professionals and we are not allowed access to the recruiting channels.  Even if that were not an issue, I was not decided on this career path until March of this year.  The recruiting for the MBAs started in September.


The truth is that I don’t have a single thing against Merrill Lynch.  On the contrary I think they are an excellent company and I will be proud to work for them.  I like the latitude that they give but they are still very different from a JPM or GS.  The clients serviced and the roles played are vastly different.  One of my mentors has worked for JPM for almost seven years and he has over $7B in AUM.  Imagine having that at ML and getting 40% of the production for that.


The biggest concern I have is that my schooling will be underappreciated regardless if I can sell or not.  I think it's a valid concern considering what I sacrificed to get the degree.


WM


Jun 14, 2006 6:59 am

Seven BILLION?  BILLION?  BILLION?  After 7 Years? 
Is their title "Mutual Fund Portfolio Manager"?  If the are a rep
with that much AUM it would make them one of the the largest producers
in the world.  At anywhere near that level their pay-out at ML
would far exceed 40% BTW (Unless they are running a pile of corporate
cash inan institutional platform of course). You run in some pretty
interesting circles. 



Your degree will be underappreciated for some time.  Not because
you will not us it, but because it will not be acknowledged as you feel
it should be.  Your concern is valid and with all of your posts I
fear you have made a mistake.  Good luck.

Jun 14, 2006 7:48 am

Damn, he's got an MBA?  Wow, that's a rarity in Wall Street, he should be a hiring manager's dream.


Something to consider.


If you're really an attractive new hire you will get an offer during a hiring freeze or even if the hiring cycle has passed.


If you're ever told, "Gosh you missed the hiring cycle, or we are in a hiring freeze" understand that what is being said is a variation of "Don't call us, we'll call you."

Jun 14, 2006 8:31 am

rightway:

Your degree will be underappreciated for some time.  Not because you will not use it, but because it will not be acknowledged as you feel it should be.  Your concern is valid and with all of your posts I fear you have made a mistake.  Good luck.

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


Thank you.  Your responses have been very helpful.


I'm not so much concerned that I made a mistake but more so that I didn't generate enough options before making a decision.  That is not to say that if I were presented with other options that I would have chosen differently.  It's just that there is an uneasy feeling associated with signing up for a 30-month commitment….especially one that I was not made aware of until the last moment and after I turned down other options.


I will now focus all of my energies and on working out ways to increase my chances for success.  I've already started prospecting and I have had a handful of people (non-family) tell me they are willing to give me some assets to manage for them.  If they follow through, that will give me close to a $3M start.  I don’t think they would have been willing to give me some of their assets without FA experience should I have not had my educational background.  It will however take some time to pay back the $115K I spent on my MBA tuition.


WM


Jun 14, 2006 9:56 am
WealthManager:

rightway:

Your degree will be underappreciated for some time.  Not because you will not use it, but because it will not be acknowledged as you feel it should be.  Your concern is valid and with all of your posts I fear you have made a mistake.  Good luck.

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


Thank you.  Your responses have been very helpful.


I'm not so much concerned that I made a mistake but more so that I didn't generate enough options before making a decision.  That is not to say that if I were presented with other options that I would have chosen differently.  It's just that there is an uneasy feeling associated with signing up for a 30-month commitment….especially one that I was not made aware of until the last moment and after I turned down other options.


I will now focus all of my energies and on working out ways to increase my chances for success.  I've already started prospecting and I have had a handful of people (non-family) tell me they are willing to give me some assets to manage for them.  If they follow through, that will give me close to a $3M start.  I don’t think they would have been willing to give me some of their assets without FA experience should I have not had my educational background.  It will however take some time to pay back the $115K I spent on my MBA tuition.


WM




$115k on the degree and your TRUE due diligence began:


Joined: May 16 2006
Location: United States
Posts: 43


i know some MBA's like you - waiting tables.


it sounds like you're in for a slow liftoff relative to your degree- but with good luck, a good attitude (you'll need work on this), hard work and a few more million$ contacts, you'll be allright-



Jun 14, 2006 10:02 am
TexasRep:

$115k on the degree and your TRUE due diligence began:


Joined: May 16 2006


The join date does not tell much of the story.  I'm 33-year old career changer.

Jun 14, 2006 11:17 am

Youre insane if you sign that contract.  People on this board (obviously) act like being an FA is the ultimate in job success if you hit the numbers.  The reality is that its like other career for even those who 'make it,' and people do want to leave for better opportunities. 

Jun 14, 2006 11:30 am

xmsbroker you are the most negative person on the board. If you hate the field so intensely why do you continue to post on these message boards?



Secondly, why are so enamored with WealthMangers' degree? Read the article on nytimes.com entitled "Was earning that Harvard MBA worth it?"



I quote "...But others advocate hands-on experience over academic buffing and polishing. "M.B.A. programs train the wrong people in the wrong ways with the wrong consequences," said Henry Mintzberg, a management professor at McGill University in Montreal.



In 2003, Professor Mintzberg tracked the performance of 19 students who graduated from the Harvard Business School in 1990 and were at the top of their class academically. Ten of the 19 were "utter failures," he said. "Another four were very questionable, at least," he added. "So five out of 19 did well."

Jun 14, 2006 11:35 am
fired?:

xmsbroker you are the most negative person on the board. If you hate the field so intensely why do you continue to post on these message boards?

Secondly, why are so enamored with WealthMangers' degree? Read the article on nytimes.com entitled "Was earning that Harvard MBA worth it?"

I quote "...But others advocate hands-on experience over academic buffing and polishing. "M.B.A. programs train the wrong people in the wrong ways with the wrong consequences," said Henry Mintzberg, a management professor at McGill University in Montreal.

In 2003, Professor Mintzberg tracked the performance of 19 students who graduated from the Harvard Business School in 1990 and were at the top of their class academically. Ten of the 19 were "utter failures," he said. "Another four were very questionable, at least," he added. "So five out of 19 did well."


I dont hate the field, I do think its important to express the other side.