While retail brokerage is far from being an integral business at Goldman Sachs & Co., Wall Street's most prestigious investment bank has to be a bit shaken by the number of brokers beating a path from its boutique surroundings, and landing at Merrill Lynch.

Accustomed to losing brokers to other retail boutiques such as Morgan Stanley & Co. or Donaldson Lufkin & Jenrette, Goldman's new challenge comes from Merrill Lynch, which has been offering major recruiting packages to Goldman prospects nationwide.

In July, Merrill hired David Fink, Greg Reed and Cole Dawson in its main Houston branch, adding a quick $10 million to its production rolls. That move was preceded by a similar strike three months earlier in Beverly Hills, Calif., where Merrill hired Brett Messing, Alan Zafran, David Hou and Mark Sears, a quartet worth about $18 million in production.

The movement, sources close to the moves say, has been sparked by a combination of two factors: Merrill's generous recruiting packages and a general feeling of unrest in Goldman's high-net-worth private client services unit.

As for Merrill's pitch, in addition to a 50% up-front bonus, the firm is matching the brokers' trailing 12-month commissions with a restricted stock or stock option award with, in some cases, a 10-year vesting period.

Another reason Merrill can attract high-end Goldman reps is the fact that Goldman's retail brokers are usually excluded from the firm's lucrative partnership track, an issue that has historically dogged the firm's retail producers.

"Three million dollars in production is high for retail but nothing for Goldman Sachs," says one competing high-net-worth executive who requested anonymity. "Bankers can produce three times that amount."

Adds one former Goldman rep: "While you're with the firm, there aren't many ways to monetize your business. You can either start your own money management firm or jump to a competitor."

Firm-hopping was considered unsavory within the Goldman culture. The firm doesn't recruit retail brokers from other firms; it tends to hire freshly minted MBAs. But the equity portions showing up in recent Merrill recruiting deals makes jumping ship more respectable than going for a cash bonus with strings attached.

Sources also say veteran Goldman Sachs brokers are becoming increasingly disillusioned with the firm, especially during the past year, as it has ratcheted up its proprietary mutual fund activity. The firm's asset management arm has been hiring fund wholesalers and encouraging its elite brokers to use Goldman Sachs Asset Management products as opposed to independent money managers and outside advisers, further rankling the retail troops. The payout also has remained in the 29% to 32% range, but that may be revamped by the firm to keep brokers from talking to competitors.

While the amount of production Merrill has taken from Goldman would have other wirehouses throwing lawsuits at each other, pros familiar with Goldman's culture doubt the firm will respond.

"Suing Merrill would be beneath Goldman," one observer says.