Merrill Retention

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wolverine1945's picture
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What are the odds that BAC will not pay it since they just got 20 Billion from TARP

B24's picture
B24
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We'll see when the word finally gets out about them using tax dollars to pay billions in retention bonuses, while the rest of the world gets laid off.

kappa1997's picture
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I think its already been paid. I would imagine it was worth a few hundred million. What if BAC goes under and those brokers get a check to move in addition to their checks to stay at BAC
Wow it would be nice

leftml's picture
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Talked to a co worker in my old office . A guy who's on ACTM said the retention might be renegotiated.

Phan2om's picture
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Retention has not been paid- supposedly on or before the 23rd....beginning to wonder what is going to happen.  Funny that our deal was collapsing in December while management of the firm was telling us how great things were going.
 
There is no credibility left at ML.  I think this firm is going to fail.  Just my opinion.

bondo's picture
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Phan2om wrote:There is no credibility left at ML
 
Heard that same comment from multiple, decades long FAs the last few days.

kappa1997's picture
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FA's at ML must be upset by this. I know they were expecting to be paid prior to the new year and supposedly are paying interest on the loan but have not been paid the actual bonous?  

I could see the package being renegotiated, actually BAC should just relinquish ML and let what happens happen. I think the firm makes it, however they lost all their top people so i suppose thats not possible at this point......

Hank Moody's picture
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I've never met a ML broker that I liked and I hope they get stiffed, just like they deserve. 

eggward's picture
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Hank, that's pretty cold.  I'm not a fan of ML, but I hope the people at the company come out of this ok one way or another.  Its a very tough spot to be in and I don't envy them.  Plus, bad news for any one company in this industry reflects on us all, at least in the eyes of many of our clients.

mnbondguy's picture
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The brokers at all these wirehouses have gotten screwed by stuff completely unrelated to their business.  I hope it works out for all involved, no matter which firms they are with. 

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B24
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kappa1997 wrote: I think its already been paid. I would imagine it was worth a few hundred million. What if BAC goes under and those brokers get a check to move in addition to their checks to stay at BAC
Wow it would be nice

I bet it's more than that. Let's say 5,000 FA's got retention at an average of $100,000 each. That's, hmmmm, $500mm. I bet the number is well more than double that when all is said and done. After all, didn't $1mm producers get like 100% of t-12? How many 1mm producers do you think they have?   That's a lot of coin for taxpayers to cough up when half the country is getting laid off (or when 30,000 BAC/ML employees are being laid off). Hell, if you take their"average" producer at $750K T-12, and give them 25%, that's over $900mm.

Merrill said about 6,200 reps were eligible for retention, and about 95% signed their agreement.

"Those reps producing over $1.75 million will get 75 percent in upfront cash, taxable over 7 years, and another 25 percent in deferred bonus over three years. For reps producing $1 million to $1.75 million, the package includes 75 percent in cash upfront, and another 25 percent based on growth in production over a three-year period.

For lower-producing Merrill advisors, the offers range from a total of 75 percent of trailing 12, to 20 percent of future growth. Advisors producing $750,000 to just under $1 million will get 50 percent upfront cash over 7 years and 25 percent on growth in production over three years; those producing $500,000 to $750,000 will get 25 percent cash over 7 years and 25 percent on growth. For advisors producing $250,000 to $499,000, the deal includes just 20 percent on production growth in deferred cash over three years. (On average, Merrill reports that its advisors produce $767,000 in revenue a year.)"

fritz's picture
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There is an article out on reuters saying retention may be delayed or renegotiated due to last weeks news.  The article says retention was reported to be 3.8 Billion.

SouthernBroker's picture
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mnbondguy wrote: The brokers at all these wirehouses have gotten screwed by stuff completely unrelated to their business.  I hope it works out for all involved, no matter which firms they are with. 

I'm glad to see someone has a heart. I'm pretty sick of the tone of this board. There are some real jerks around here. Between them and the "chicken littles" I feel bad for a lot of your families.

Rugby's picture
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fritz wrote:There is an article out on reuters saying retention may be delayed or renegotiated due to last weeks news.  The article says retention was reported to be 3.8 Billion.Can you post a link?

SouthernBroker's picture
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FYI, I do just fine myself. I have every offer you can have. I just can't stand the apparent joy that some of you clowns get from other's hardships.

Sellout21's picture
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I'm sure "Rainmakers" like Ferris all have enough time to have 608 posts to this forum.

Bud  Fox's picture
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What I am wondering is how can anyone here be having hardships?  It seems as if everyone here is a million+ dollar producer.  I think I am the only one in this prison that is guilty at < 1/2 million.  Everybody posts there hardship on one thread and then talks about being in the million dollar club in another thread.   Sorry, no sale here...

nestegg's picture
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Bud Fox wrote:What I am wondering is how can anyone here be having hardships?  It seems as if everyone here is a million+ dollar producer.  I think I am the only one in this prison that is guilty at < 1/2 million.  Everybody posts there hardship on one thread and then talks about being in the million dollar club in another thread.   Sorry, no sale here...I am with ya Bud!

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Ferris:  That's great you did $800, but it's the fact that you call yourself a "rainmaker" that I think is humorous.  $780k is the average at ML, and although many of the thundering herd have enormous egos, very few would call themselves a rainmaker.  

Sellout21's picture
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Ferris:  For the record, I did $607k at LOS 6.  Not shabby, but a long way to go.  There are people who do $500k+ just by inheriting accounts from departing FA's or inheriting their daddy's book.  They are hardly rainmakers.  It's also a lot easier to do more production in different areas simply b/c of demographics and selling certain products.  I know $1M+ producers working at local banks simply selling "B" share annuities and taking 7.5% upfront.  Everything's relative, but I don't use the word "rainmaker" so liberally. 

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Ferris Bueller wrote:I think that anyone over 500K is a rainmaker. I notice that you didn't answer the question. Most will never do that in their career and just because it is average at ML doesn't mean other firms don't covet us. In fact, ML offered me 120% of my T12 to take my business there. Laugh all you want, but I'm the one laughing.
 
Man I read some of the stuff one here and I start cracking up..but this has to be the tops. "Rainmaker" LOL!!  I am not sure any broker is a rainmaker when firms pay analysts 7 figures to write b.s stock reports..Abby Cohen at GS makes 7 million a year and she got demoted for being wrong so often..She is basically being paid her contract just to stay quiet. A firm makes more on a random overnight block trade than what a broker brings in for them in a year..Sure most guys get that they are a tiny speck of dirt in the big picture for these places, but FB your Rainmaker line is classic, I have sent it to over 100 guys and everyone is laughing.

Sellout21's picture
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No offense Ferris, but it's this type of arrogance that played a huge role in the demise of the financial markets.  After everything that has happened there is zero accountability and absolutely no humility.
Fritz:  It's a pretty poor comparison b/w a financial advisor and Abby Cohen, or anyone at GS for that matter.  GS has more intellectual capital than any other firm on Wall Street.  I think Abby is awful, but it's very difficult for analysts to make predictions when companies are not fully disclosing their books, and only the top 1-3% of analysts are making 7 digit salaries.  Meredith Whitney at Oppenheimer and David Rosenberg at ML have been two of the best over the last 18 months.

fritz's picture
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Sellout21 wrote:
No offense Ferris, but it's this type of arrogance that played a huge role in the demise of the financial markets.  After everything that has happened there is zero accountability and absolutely no humility.
Fritz:  It's a pretty poor comparison b/w a financial advisor and Abby Cohen, or anyone at GS for that matter.  GS has more intellectual capital than any other firm on Wall Street.  I think Abby is awful, but it's very difficult for analysts to make predictions when companies are not fully disclosing their books, and only the top 1-3% of analysts are making 7 digit salaries.  Meredith Whitney at Oppenheimer and David Rosenberg at ML have been two of the best over the last 18 months.
 
No offense taken, but a broker doing 800K calling himself a rainmaker is a joke.  My branch has settled two trading disputes this year for almost double that.  We also paid a guy 200% of his T-12 16 months ago $2.3 million up front and the guy has not cracked 10K one month since he has been at our place.  My point is in the scale of this biz and the way firms blow money, its hard for one broker to be a "rainmaker."

duster10's picture
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I find it hard to believe that anybody's TOP clients were up in 2008, unless they brought in a lot of cash at some point during the year, and you consider a higher balance in the brokerage account on 12.31.08 UP. Not trying to ignite a fight, just voicing an opinion. For what it is worth, in the Dictionary we use on this site, I am a Rainmaker.

mnbondguy's picture
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the prosecution rests...

duster10's picture
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Fritz; are you telling us that a guy who had a T-12 doing 1.15mm did less that 120K last year (2.3 million =200% Upfront)?? That is staggering to hear!! How is that humanly possible. If that is true, I am not sure if the guy that got brought over is an idiot or a genius.

Sellout21's picture
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No one is irreplaceable in this business. 
On another note:  Why all the ML bashing?  Say what you want about the firm, all firms and the vast majority of advisors all use ML as the example.  Whether it's retention bonuses, comp plans, # of assets, # of brokers, etc..., people always look at ML for precedent.  I'm by no means saying they do everything right, but you can't deny they usually set the standard when it comes to retail brokerage.

duster10's picture
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Wow....gutsy call if that is the case. Well done! I was in the same boat up until the end of May, then I got about 50% back in the market. Needless to say, my Top Clients were not up in 2008.

duster10's picture
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Why all the Ml bashing?? Probably for a couple reasons. Most ML guys I have met are rather egotistical, and border line elitist. Another reason is that a lot of people in this world like to see other fail. One last reason is that I would wager that the ML/WS ratio for this message board is around 1:5.

Sportsfreakbob's picture
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Congrats to you all on being rainmakers!!! LOLOn another more serious note...Ferris you bring up a good point that i am surprised has not been brought up front to the general public yet. With Citi and BAC getting all this money and guarantees from Uncle Sam, it is only a matter of time before some newshound gets a hold of the retention announcements and runs with it. And that is going to cause all kinds of outrage. Should be interesting.My last comment is...how th freak does Ken Lewis have a job? He makes Vikram, Chuck Prince, et al, look like geniuses.ML is the one place i wouldnt go right now. That situation is scary.

fritz's picture
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duster10 wrote:Fritz; are you telling us that a guy who had a T-12 doing 1.15mm did less that 120K last year (2.3 million =200% Upfront)?? That is staggering to hear!! How is that humanly possible. If that is true, I am not sure if the guy that got brought over is an idiot or a genius.
 
"idiot or genius"  That's funny, the topic has come on several occasions at the branch.  Think everyone to a man in the office says genius!!  Back in 2000 (top of the market)was at a different firm and about 8 or 9 guys came over with T-12 of 7 figures and NONE of them ever did 300 again before their 5 year contract was up.  From my limited sample, maybe 25 guys I dont think 20 of the guys even came close to a breakeven deal for the new firm, it makes me wonder how firms continue to pay like they do, maybe it works out more often at other places??

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I guess I would have to wonder what it would be like to go to work every day, and you rboss thinks you basically stole from him.  How could you gather up the stones to even show up everyday (that is a rhetorical question, I know he has 2.3 million reasons).  In all seriousness, what it is it like for him at work??

maddog's picture
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Fritz,
 
I echo Duster's question, "how can that be possible?"
 
Did they do nothing once moved? Were they at the end of careers?  I would think that whatever formula they used to get to 7 figures would still be viable.
 
 

fritz's picture
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 "How could you gather up the stones to even show up everyday (that is a rhetorical question, I know he has 2.3 million reasons)."
 
I kind of wonder also what it would be like to be that far off, I have seen so many guys come that have dropped 50% from the alleged numbers, but this one pretty severe. As to whats it like for him, no one really says anything he puts in his 6 hours a day and goes home.    One guy back in 2000 was supposedly around 500k at PRU and his top month at the new place about 4K.  He lasted about 18 months and they just told him to go home.  From what I've seen most guys leave when they know they will not hit the t-12 for a long time if ever, or if they are about to lose a big account...As long as you show up not sure what the firms can do when guys dont pan out??

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The real question is how come the manager who recruited them still has a job??  In my opinion, most of management is completely worthless and they are the ones who should be held accountable.  They are the ones getting big bonuses when things go well, but are the first to start pointing fingers when it gets ugly.

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fritz wrote: "How could you gather up the stones to even show up everyday (that is a rhetorical question, I know he has 2.3 million reasons)."
 
I kind of wonder also what it would be like to be that far off, I have seen so many guys come that have dropped 50% from the alleged numbers, but this one pretty severe. As to whats it like for him, no one really says anything he puts in his 6 hours a day and goes home.    One guy back in 2000 was supposedly around 500k at PRU and his top month at the new place about 4K.  He lasted about 18 months and they just told him to go home.  From what I've seen most guys leave when they know they will not hit the t-12 for a long time if ever, or if they are about to lose a big account...As long as you show up not sure what the firms can do when guys dont pan out??If someone drops that low and never rebuilds they were either a one-trick pony at their old shop or they just gave up.  If they had the talent to build a 500k or 1mil book, then they had the ability to rebuild it too.

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CNBC and Bloomberg have had a decent amount of coverage on the retention bonuses.  Most clients realize that salesmen are an extremely large part of the profitability of any organization.  The bonuses can somewhat be rationalized to keep top talent, and your average person would much rather see the foot soldiers getting bonused rather than the executive management.
I don't know if Ken Lewis is an idiot or a genius, but he's got the government by the balls now.  There's no way they will let Bank of America fail, and Lewis knows it.  If the government is giving out money, BOA wants the lion's share.  Lewis knows he can gain even more market share with a government backstop.  Warren Buffett was early too, but everyone calls him the "Oracle".

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Ferris Bueller wrote:Sellout21 - Arrogance? I conservatively manage my client money. I didn't create financial instruments that were crap and then get them AAA rated NOR did I sell them to my clients. My book consists of treasury bonds, muni bonds, and conservative stocks/mutual funds. My top clients were all UP for 2008. Fritz - I doubt you know 10 guys, let alone 100 and those 10 are the ones you happen to know at the local gay bar. If our firms don't need guys producing over 500K and can live off a random overnight block trade then maybe they should heed your advice and just fire all of us. You have expressed some dumb shit here before, but that takes the cake. That plus actively HOPING that no WS/AGE brokers get retention make you a jerkoff. Where's Put Trader, he actually made more sense than you.
 
FB not hoping nothing..if thats what you think its wrong.  Just saying heard over 2 months ago WFC does not want to pay retention.  If they do and you get some good for you.  Dont know that saying what has happened so far makes me dumb? Think I'd feel dumber if i said something was coming and it has not in 100 days.

showmethemoney's picture
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Nice job

showmethemoney's picture
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We also paid a guy 200% of his T-12 16 months ago $2.3 million up front
and the guy has not cracked 10K one month since he has been at our
place.****************************************Thats absurd. What did the guy just stop working??? He'd F'd once the money runs out. Fact they ought to fire him right now and get back what they can if he has any left. On the other hand, its not out of the question that the guy is a genius, managed to double the money in the mkt and basically if they want to fire him and demand back the money, he's in great shape.

fritz's picture
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If you get fired for lack of production they cant get the money back....If big client decides not to come, or big client dies, etc etc...too many things can and do happen beyond brokers control. The firms know the risk when they hire a recruit.  If they canned everyone who got a deal  these firms could raise billions.

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Most contracts state that if they fire you for 'reason', they can come back and get the bonus.  I think one could definitely argue that lack of production is plenty of reason.  On the other hand, the advisor will argue all the reasons why the firm was the reason for their poor performance.

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Wow...I never realized how hated ML FA's were until I started reading this board. I really don't get it. Sure there are some A holes(like everywhere) but most are hard working LOYAL to the FIRM guys just trying to do the right thing by their clients and grow a business. I've been there over 20yrs and it used to be a great firm. As far as the retention packages they're safe...we've all signed legal binding contracts (binding us to the firm and the cash to us) if they didn't pay there would be a battle. Everyone on this board thought we were done when BofA put that non compete language in the deal, that we were dead, but the FA's at ML got them to drop it from the contract. I'm sure that stuff won't appear in any other deals on the street....No Thank You Necessary... The previous writer was right, the business has always followed the ML lead...will that continue, doubtful. Too much has happened beyond the control of everyone on the board to cling to some us vs. them attitude. I don't know about you guys but I need time to heal, this has been an astounding time in our industry. My partner and I run a good business and we're doing whatever we have to do to hold it together...Let's share some business ideas and good practices instead of hate posts...just a thought.

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fritz wrote:There is an article out on reuters saying retention may be delayed or renegotiated due to last weeks news.  The article says retention was reported to be 3.8 Billion.
 
Fritz - You ever find that link?  I'm curious to see that one.  Would make for an interesting read around the office.

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Plus here is some, maybe, bad news for Merrill brokers

Fed's BofA rescue may change broker retention plans

By Bruce Kelly January 16, 2009, 8:44 AM EST

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The announcement early this morning by the Treasury Department and the Federal Deposit Insurance Corp. that the government will invest $20 billion into Bank of America Corp. of Charlotte, N.C., through a purchase of preferred shares adds uncertainty to the planned retention bonuses that BofA is scheduled to pay brokers at recently acquired Merrill Lynch & Co. Inc.
 The first chunk of that money is slated to go to some brokers Jan. 23, said one industry source, who asked not to be named.
That source pegged the total amount set aside to retain New York-based Merrill’s almost 17,000 brokers at $3.6 billion.
Selena Morris, a Merrill spokeswoman, said it was unclear whether any of the government money would be used to pay brokers’ retention bonuses. She also would not comment on the dollar amount the firm was committing to retain its advisers.
The Treasury earlier invested $15 billion of TARP money in Bank of America.

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Sellout21 wrote:Most contracts state that if they fire you for 'reason', they can come back and get the bonus.  I think one could definitely argue that lack of production is plenty of reason.  On the other hand, the advisor will argue all the reasons why the firm was the reason for their poor performance.
 
Know its a grey area, but have two friends who are managers at two big places and they both say poor production is impossible to recover money from.  As long as the broker keeps trying or showing up very hard for them to fire him and get $$ back. If anyone knows for sure otherwise I am curious.  But I have seen about 20 guys get fired or quit on deals and all the guys who got fired, maybe 1/3, none of them were even asked to pay back anything.  Most of the rest just sat there until the contract ended and then either left the biz or went indy.

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Fed's $20B lifeline to BofA doesn't affect retention plans
Merrill reps feared cash infusion would jeopardize bonuses

By Bruce Kelly  and Mark Bruno  January 18, 2009, 6:01 AM EST

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The fact that the federal government is infusing another $20 billion into Bank of America Corp. will not alter retention package plans for thousands of Merrill Lynch brokers, said a source with knowledge of the deal, who asked not to be identified.

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As the government injects Wall Street firms with tens of billions of dollars to keep them in business, Washington is imposing a number of restrictions on executive compensation at companies that have accepted federal funds. So far, retail brokers have escaped scrutiny over retention bonuses, an embedded perk of the retail-securities business that brokers commonly receive in order to tie them to their new firm.
The first chunk of bonus cash is slated to go to brokers Friday, said one industry source, who asked not to be identified.
That source pegged $3.6 billion as the total amount set aside to pay Merrill brokers to stay in their seats.
Selena Morris, a Merrill spokeswoman, declined to comment on the amount going to brokers.
Bank of America needed to show advisers the money, industry observers said.
"If they didn't pay out the bo-uses at this point, it would create even more attrition than if they never attempted to keep these people in the first place," said Andy Tasnady, founder of Tasnady & As-sociates LLC, a Port Washington, N.Y.-based compensation consulting firm to the brokerage industry.
It is in the government's interests not to monkey around with bonuses for brokers, said Yale Tauber, principal of New Canaan, Conn.-based Independent Compensation Committee Adviser LLC.
"The government just made itself an even more significant shareholder in BofA, and it needs to think like an investor," said Mr. Tauber, who serves as a compensation consultant for Citigroup Inc. of New York. "Why would a smart investor want to do anything that would prompt the people with the most significant books of business to leave the company?"
SAVED MONEYMr. Tauber added that some of the money BofA and Merrill saved when executives opted to forgo their bonuses for 2008 could also be applied to the retention bonus pool.
"Any compensation to top executives can be deferred," he said. "But bonuses to keep your top talent in place have to be paid right now."
The details of the Merrill retention bonus plan were released in October.
Since then, some Merrill reps have been fretting that their retention bonuses may be in jeopardy.
BofA of Charlotte, N.C., wrapped up its acquisition of New York-based Merrill on Jan 1.
For months, close to 17,000 Merrill reps have sat and watched as questions about BofA's stability swirled, with some worried that the bank might not have the funding to support the full retention plan it outlined in October.
If retention bonuses for brokers had been at risk at Merrill, that could have spelled trouble for other reps at recently combined firms that also have taken federal money, brokers and observers said. 
At midnight Thursday, the Department of the Treasury and the Federal Deposit Insurance Corp. said they were investing $20 billion in BofA.
As part of the BofA bailout, the Treasury Department and the FDIC will also give protection against the possibility of losses of $118 billion in loans, securities backed by residential and commercial real estate loans and other such assets, all of which have been marked to current market value.
It appears that Merrill has been stockpiling cash to keep the best of its brokers from jumping ship.
Last week, sources said that Merrill implemented a significant restructuring in its brokerage business, one that involved shedding some of its highest-earning managers in an attempt to cut costs. The firm consolidated its four divisions into three last week and revamped its regional-coverage structure to blanket 15 different regions, down from 30.
In the process, Merrill eliminated a number of management positions "where people were earning more than $2 million or more" to oversee divisions or regions, said a source, who asked not to be identified.
The restructuring, which took place last Wednesday, could generate about $300 million in cost savings, said a source, who would not speak for attribution.
Ms. Morris confirmed the divisional and regional realignments but could not comment on any other details of the restructuring.
This is the second time in five months that Merrill's registered reps and advisers have seen their firm pulled from the potential brink. As Wall Street was collapsing in mid-September, BofA said it would buy Merrill for $50 billion.
When Treasury officials agreed to extend a second bailout to BofA last week, bringing to $45 billion the total cash the bank is now getting from the federal government, the likelihood that Merrill would make good on its retention promises in-creased greatly, observers noted.
On the surface, industry observers feel it might be a politically sensitive issue to use taxpayer money to hand out several billion dollars in bonus payments to Merrill workers. What's more, it would come on the heels of the firm's $15 billion loss for the fourth quarter.
BofA on Friday reported that it had suffered its first quarterly loss in 17 years due to escalating credit costs, write-downs of $10.47 billion and trading losses in its capital markets businesses.
Its fourth-quarter loss — of $2.39 billion, or 48 cents a share — compares with a profit of $215 million, or 5 cents a share, achieved a year earlier.
Dan Jamieson and Andrew Coen contributed to this story.
E-mail Bruce Kelly at bkelly@investmentnews.com. E-mail Mark Bruno at mbruno@investmentnews.com.

fritz's picture
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That is more current..I can not see how they could back track on the retention at this point.  Would think that would be the end of MER if they took it back.

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Joined: 2007-03-08

Heads up! -
Be very careful to check your new contract whether your retention bonus OR a transition package if you are changing firms, be it wire to wire or to indy... almost all of the language in the new contracts for upfront or bonus money will have a qualifier in it stating something along the lines that you must produce a certain amount within a certain time period or you will be liable for returning a portion of the funds. One of the popular "claw back" provisions I have seen is you must produce 75% of your documented trailing twelve GDC within 15 months or return all or a portion (pro rata) back to the b/d. This will reduce the amount of upfront monies at risk for the firms. In the example that Fritz gave for the producer turned non producer, it protects the firm somewhat. I think we will see big upfront deals fade into the sunset by summer.

Sportsfreakbob's picture
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Joined: 2008-08-24

Mucho - if that is the case, then the big up front deals are already gone, because with that claw back clause, they look more like back end deals. If you dont make the number you dont get the money.

HymanRoth's picture
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Joined: 2008-08-25

Sportsfreakbob wrote:Mucho - if that is the case, then the big up front deals are already gone, because with that claw back clause, they look more like back end deals. If you dont make the number you dont get the money.
These firms have armies of lawyers and HR consultants that help them craft these agreements to make them 'look' good.  "Back end" would be the correct term to describe how these deals actually impact many advisors who accept them.  No lube.

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