Prudential Securities in April offered to extend the time recruits have to pay off promissory notes. Branch managers say the move was made to ease brokers' tax bills in a time of declining production.
“Some guys were feeling pinched,” says one West Coast branch manager. “They got in a jam because they assumed the market would go one way and it went another. … I'm proud of the way the firm handled this. It was the right thing to do.”
Another manager, in the Southwest, says the firm offered to extend contracts for everyone who signed on in January 2001 and before. “They were given four-year extensions,” the BOM says. That means the monthly taxes paid on their bonuses will be cut in half. The amount of total interest due (and forgiven) on the notes was left unchanged. The manager estimates that three-quarters of the reps hired during Prudential's recruitment drive agreed to the restructured deal.
Some of Prudential's 2000 recruitment bonuses were as high as 150% of trailing 12-month production.
One Prudential broker speculates that the firm wanted to ensure its high-priced recruits stayed put as Prudential Financial prepares to go public. But the Southwest manager says that was not a concern. However, he concedes the aggressive hiring last year definitely had something to do with the IPO.
“We want to be loaded when we go public,” the BOM says.