Prudential Securities is a few months away from the official close of its spinoff to Wachovia Securities, but you would never know that from the way it's recruiting new brokers. The firm is recruiting again — and some say it's because it is afraid of losing a substantial number of brokers in mid-May when it becomes easier to leave.
Pru has created a new recruiting package — one that closely resembles PaineWebber's dangling-carrot deal. Like the UBS deal, brokers would get modest upfront bonuses, followed by larger payouts after two years.
Despite the attractive package, some recruiters believe that the pending Wachovia merger will prevent Pru from reeling in many new brokers. They point out that even after the deal closes, recruiting could be difficult because there will be a year-long platform integration process that is likely to keep brokers from signing on to the new No. 3 broker network.
“They're not going to get anybody until people start to see what the new firm starts to look like, which will be July or August,” says one industry recruiter.
Sources inside and outside the firm say that Pru managers are bracing for the loss of brokers, starting this month. That's when the MasterShare profit-sharing program first vests, and reps get their quarterly managed account fee payout (the check arrives in early May, say Pru brokers).
“Getting your share of MasterShare now would be a good reason to stay,” says one producer on the East Coast, who says UBS PaineWebber and Merrill Lynch are soliciting his region heavily, sometimes using that deferred compensation plan as bait. “Some of the offers from Merrill include guaranteeing 50 percent of the unvested portion of the deferred comp with bonuses up front,” he says.
According to sources, the Pru deal offers a 70 percent upfront bonus to brokers with production of $400,000 or more over the last 12 months. After 14 months, an additional 15 percent is given, based on the best 12 of the last 14 months. After 26 months, there's an additional 15 percent.
For brokers with production of $300,000 to $400,000, the percentages are 50 percent upfront, then an additional 20 percent and then an additional 15 percent.
The package gets a bit more complicated for reps with trailing-12 month production between $70,000 and $299,000. The percentages are 40 percent upfront, then an additional 20, then 15 — but it depends on how productive the broker is in comparison to his length of service. For instance, a rep in the business for one year needs only $70,000 to qualify for the deal, while someone in the business two to three years needs $130,000, and four to five years, $195,000. Someone with length of service of six to seven years needs $235,000 in annual production, sources say.
“The managers aren't really focusing on the deal,” says one recruiter. “They're having to deal with a lot of retention issues right now.” Among those issues are a new 30-basis point charge for sweep accounts that was imposed in March, as well as broker backlash against a revised employee reporting statement that some reps felt was an attempt to impose a non-solicit agreement.
A Prudential spokesman had no comment on the details of the package.
Less and Less
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|Source: company reports|