Bank of America (NYSE:BAC)
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Bank of America Corp.'s (BAC) Merrill Lynch Wealth Management unit has tweaked its recruiting deal to attract financial advisers from competitors, offering bigger upfront cash payments as well as an extra client-asset incentive to a larger pool of top-tier brokers, according to people familiar with the situation.
The new package, announced to some recruiters and managers last week, comes as the Merrill Lynch brokerage has lost some advisory talent to rivals, including UBS AG (UBS, UBSN.VX), in recent weeks and is a response to stiffer recruiting competition with a rising equity market so far in 2012, these people said.
Merrill Lynch, part of Bank of America's Global Wealth and Investment Management business, is now offering top-tier advisers--in the first through third quintiles--at UBS, Morgan Stanley (MS) and Wells Fargo & Co. (WFC), 150% of the fees and commissions they generate from clients in an upfront cash payment, up 7% from a previous recruiting package. Brokerages use quintiles to rank advisers based on criteria including annual production and length of service.
A Bank of America spokeswoman said "ours has largely been a 'grow your own' talent strategy, but we have and continue to be a competitive, but highly selective, recruiter of top industry talent."
In recent years, the highest-producing advisers, who have joined the four major brokerages, have been known to collect signing bonuses of as much as 330% of their annual production, which could equate to contracts in excess of $2 million.
Under the new Merrill Lynch offer, which is a nine-year deal in the form of a promissory note, eligible brokers include those with a "dynamic book of business, strong growth track record, a good compliance background, and a minimal history of moves," according to a document reviewed by Dow Jones Newswires.
Advisers who receive the so-called new transition package also are eligible to take home back-end awards, including 25% of their prior production in a cash bonus, if they bring over 65% of their clients' assets in six months.
Additionally, these brokers could receive a 50% bonus payout--half in cash and half in stock--after the first year of the deal if they meet a 75% client asset hurdle. All in, the new hires could take home roughly 200% of annual production in cash after their first year at the firm, according to these people.
Merrill Lynch, which boasts roughly 17,300 advisers, has been somewhat affected by the mortgage-related legal woes at Bank of America, though the unit's push to add experienced brokers is a sharp contrast to the cost cutting and layoffs experienced in other company business lines.
Bank of America, like many banks, is in the midst of slashing expenses in a tough operating environment, though the company also is paring back its size and reach as it positions itself for the future.
-By Brett Philbin, Dow Jones Newswires; 212-416-2173; firstname.lastname@example.org