ML “Transition” Packages are out

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WealthManager's picture
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The Merrill Lynch “Transition” packages are out.  As I suspected, only the top producers are getting good deals.  I bet that we will see a mass exodus of FAs with less than $750k annualized production. <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

snaggletooth's picture
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Yes, out with the details please!!!

Broker Fee's picture
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I remember yesterday somebody else on the forum did say that BAC was not going to pay a retention bonus to any rep with a TT of under 750K.
 
That thundering heard is about to stampede out the door if this is true.

WealthManager's picture
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Broker Fee wrote:I remember yesterday somebody else on the forum did say that BAC was not going to pay a retention bonus to any rep with a TT of under 750K.

 
Not quite.  There are multiple parts but under $750k there is a huge dropoff.

Iocaine's picture
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Provocative Put's picture
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Broker Fee wrote:I remember yesterday somebody else on the forum did
say that BAC was not going to pay a retention bonus to any rep with a
TT of under 750K.
 
That thundering heard is about to stampede out the door if this is true.

Where do you envision them going?

badmove?'s picture
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500-750k saleable to MS or SBarney.

SuperRecruiter's picture
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Yay crappy retention packages!

troll's picture
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The long-awaited Merrill Lynch retention package has arrived. Not surprisingly, top producers will probably be pleased, but others may not.According to a source familiar with the deal, payments will be made on a sliding scale, with Merrill FAs who generated $1 million in production over the last 12 months getting a forgivable loan equal to 100 percent of their previous 12 months’ production figure in upfront cash and deferred bonus.
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 3 years. For reps producing $1 to $1.75 million, the package includes 75 percent in cash upfront, but the other 25 percent will be based on growth in production over a three-year period.
For the rest of Merrill advisors, the package ranges from a total of 75 percent of trailing 12 to 20 percent. Advisors producing $750,000 to just under $1 million will get 50 percent upfront cash, taxable over 7 years, and 25 percent on growth in production over three years, while 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.
The Merrill deal is in line with what Wachovia paid to A.G. Edwards reps after that firm was acquired, but it is less than what Bear Stearns advisors got: There, reps producing $500,000 or more got 100 percent. Will the Merrill package be enough for FAs when their deferred comp packages have been flattened by plummeting Merrill stock, and when some wirehouse firms are still offering fat recruiting packages? 
"What happens is that everybody who makes $499,000 to $1 million is now in play," says an advisor who generates $750,000 in production. "The message being sent is bankers versus brokers. Commercial bankers don't understand what advisors do. At other firms, a guy who makes $750,000 to $800,000 is valued by the firm." Robert McCann, president of the global private client group, has told managers in recent weeks that the intended result of the package was to “build a wall around the top two-thirds of production.” An executive at a competing firm was quick to offer judgement on the numbers: “This will engender a great deal of disappointment among their FAs,” he says.
"In the context of extraordinary change in financial services and a volatile market and economic environment, it is important for clients, shareholders and the future of the combined company to retain top-performing advisors at the two current firms,” said Robert McCann, vice chairman and president, Global Wealth Management at Merrill Lynch in a statement. “This transition award, which is fully realized over multiple years, will help ensure that clients receive thoughtful advice, guidance and world-class service from the financial advisors they have chosen and trust, and that the full long-term value of this combination is realized.”
"This program is about helping Main Street clients navigate the most volatile markets we’ve seen in decades,” said Keith Banks, president of Bank of America’s Global Wealth & Investment Management division. “That’s the role of these advisors in the local communities where they too live and work. That’s the commitment of our company now and going forward and the reason we plan to combine these two great firms.”
 
 

fritz's picture
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Joined: 2006-01-12

 Saw a group of ML guys today in the courtyard, they looked like they were shocked by the events..Guess they could leave, but just wonder how you explain that you are leaving because you were not happy with the retention package??  Can't imagine clients who have lost 50% care one bit about your bruised ego. 
 
Biggest shock going to now when they look around and the others shops now offer you a piker package compared to what was there 90 days ago.  If this market just grinds its way down to DOW 5000-6000 have to wonder what this biz will look like?

buyandhold's picture
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Joined: 2008-09-23

There's something outrageous about this scenario:Merrill loses $51 billion in the subprime disaster, goes bust, has to be rescued by Bank of America -- and now the top brokers are getting bonuses to stay put.Yeah, I know the brokers didn't lose all that money, and yeah, I'm all for everybody getting what they can, and yeah, ML brokers are creme de la creme -- but to the general public, this will be seen as the rich getting richer and walking away unscathed.If I was a client I'd be asking why my broker is getting a check so he can keep MY money with ML/BAC. If my account is so valuable, why don't they just send me part of that bonus.

Provocative Put's picture
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fritz wrote: Saw
a group of ML guys today in the courtyard, they looked like they were
shocked by the events..Guess they could leave, but just wonder how you
explain that you are leaving because you were not happy with the
retention package??  Can't imagine clients who have lost 50% care
one bit about your bruised ego.   
Biggest shock going to now when they look around and the others
shops now offer you a piker package compared to what was there 90 days
ago.  If this market just grinds its way down to DOW 5000-6000
have to wonder what this biz will look like?

You know what that sounds like, Fritz?  It's sounds like you're saying EVERYTHING IS DIFFERENT NOW.

And you'd be right, in spades.

fritz's picture
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Provocative Put wrote: fritz wrote: Saw a group of ML guys today in the courtyard, they looked like they were shocked by the events..Guess they could leave, but just wonder how you explain that you are leaving because you were not happy with the retention package??  Can't imagine clients who have lost 50% care one bit about your bruised ego. 
 
Biggest shock going to now when they look around and the others shops now offer you a piker package compared to what was there 90 days ago.  If this market just grinds its way down to DOW 5000-6000 have to wonder what this biz will look like?You know what that sounds like, Fritz?  It's sounds like you're saying EVERYTHING IS DIFFERENT NOW.And you'd be right, in spades.
 
Did not want to say it but i think it is..good call PP

southcampus's picture
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Joined: 2005-09-20

Well the BAI retention package sucks even more if you've been there since 2005 and had any type of agreement based on your original hire. That package is absolutely, freakin nothing regardless of production. I believe it is 40-50% 1 mill plus for a 3 year vest and works it way down to 20% for $350-500k.  I believe that is the middle column on the previous page. Again if you have any type of previous agreement from 2-3 years ago you are excluded.
 
Based on our calls it appears we are working under Merrill's badge now (not a big surprise). Moving 2000 FA's in with 16000 FA's is a lot easier than the opposite. One good thing for us is it appears they will keep the Merrill grid and since most of us don't get the referrals we were promised it was basically like working in a wirehouse without getting paid wirehouse grids.
 
What is the current Merrill grid?
 
Good Luck to all in making it through this transition and market.

Morphius's picture
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fritz wrote:Did not want to say it but i think it is..good call PPBlind leading the blind.

troll's picture
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buyandhold wrote:If I was a client I'd be asking why my broker is getting a check so he can keep MY money with ML/BAC. If my account is so valuable, why don't they just send me part of that bonus.
 
Or you could leave an advisor you trust and take your money to someone who know doesn't you from Adam (and hasn't recieved a retention package).   Or when your advisor leaves you can let the manager assign you a new rep (be sure that they didn't get a retention award) and hope it works out. 
 
It's your money.  Do you feel lucky?
 
I guess if you're not with someone you know and trust and don't value the relationship it shouldn't matter either way, so why complain.

bancofamigo's picture
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At the end of the day ML'ers will have to figure out if they are with the right firm/bank. The retention bonus should me insulting and the couple I have talked to concurr. They need to look at UBS, maybe MS, maybe Citi and Indy. They should be careful of the regionals owned by banks.

ezmoney's picture
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ML brokers are creme de la creme????? says who??

Provocative Put's picture
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You know what's a joke?
 
A bunch of salesmen who should really be looking for a job whining about being given "Only" several hundred dollars if they won't quit.
 
If I were B of A I'd fire everybody and then accept applications from those with enough sense to know they're in a bird's nest on the ground.

Tarheels's picture
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ezmoney wrote: ML brokers are creme de la creme????? says who??

ML brokers :)

Provocative Put's picture
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Tarheels wrote: ezmoney wrote: ML brokers are creme de la creme????? says who?? ML brokers :)
 
And every investor survey run by an reputable organization.
 
There are thousands of accounts at Merrill who think more of themselves because they have an account at Merrill Lynch.
 
There is no more difficult firm to steal an account from than Merrill Lynch.
 
Years ago I was part of a team testifying before The House regarding the Telephone Protection Act.  Our leader was able to turn the table on Congressman Markey and asked him, "Mr. Markey, suppose you inherited a significant sum of money and wanted a financial advisor.  Who would you call?"
 
Mr. Markey, without missing a beat said, "I suppose I'd call my local Merrill Lynch office and ask to speak to the manager."
 
At that point we won.  Our leader responded, "So would most people Mr. Markey--which is why it is important that Congress allow all brokerage firms to use the phones to contact prospective investors."
 
They--the House--had been considering a complete ban on any calling.  There would be no need to keep a DNC list, every number in the country would be on it.
 
Those same hearings yielded a very telling comment.  The testimony was being stimulated by a member of the staff rather than a member of the House.  At some point, in response to some comment, this staffer said, "Sir, the problem with your industry is it is too capitalistic."
 
Several of us just looked at each other and remained silent--you can't talk sense to somebody who hates the entire system.
 
Anyway, that sort of thing is what those stupid failures who sink to management end up doing.

GoingIndy????'s picture
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Best part of the deal is the exlusive non-compete clause that if they sign they can't take clients with even IF they pay back the 7 year forgivible loan.
 
If you liked ML before, you really better love it if you're signing your book away.  I wonder if the 7 years applies to non compete too?

Bonded's picture
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Joined: 2008-10-24

are you kidding me? You are drinking too much kool aid. The bank of america way is you get along or you get gone. In any normal year, bank of america makes 5bb a quarter. Do you think they care about some guy doing 3 mm with a lousy margin? They make 250bp net profit on assets. You guys should get over yourselves. On a good day, you make about 40bp. Nothing more than a necessary evil. Get used to it.   Just so you know... they will do it with that southern smile.   

rocky's picture
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ezmoney wrote:ML brokers are creme de la creme????? says who??
 
not sure what the defination means, but they do have the most million dollar producers if you keep score that way.
 
I can say two things about this.  I came from AGE, and there certainly is a different level of achievement mindset at ML then at AGE, and that can be a good or bad thing depending on where you are in your life.  I view it as a good thing.
 
I also view this retention package as good.  Keep the top producers happy, this way ML continues to attract and hold onto the top tier of producers.
 
By the way, since I just came over, I am not receiving anything, and certainly did not expect to.

fritz's picture
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Bonded wrote:are you kidding me? You are drinking too much kool aid. The bank of america way is you get along or you get gone. In any normal year, bank of america makes 5bb a quarter. Do you think they care about some guy doing 3 mm with a lousy margin? They make 250bp net profit on assets. You guys should get over yourselves. On a good day, you make about 40bp. Nothing more than a necessary evil. Get used to it.   Just so you know... they will do it with that southern smile.   
 
BAC has made two awful buys..CFC could have had been had for ZERO and even then sure if they waited a couple months they would not taken them even if they got 10BB to take over their crap..and ML I have heard from several sources if they had known now the current environment they would have never done it.  Stock pushing new lows, w/o govt money this thing would be trading single digits and be on the hot seat for BK.  Not out of the woods, can't think the company is too full of itself, they are in survival mode, nothing more.

bancofamigo's picture
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You can tell by Lewis' interview that he is sensitive to the fact that he overpaid for Merrill. The guy has a Napoleon complex and refuses to be told he is wrong. The package requires they get 25% growth to get the 25% stock piece (for those under 1.75MM). Lewis and his yes men think they should grow at 25% - the acceptable level when I was at BAI.

To you Merrill guys - When I was at BofA - they cut fee based by 15% because (in 1996) the "regulators made them" which is total BS. The bankers as someone has said before cannot get over the fact that the margins on wealth management assets are so low compared to the 300 Bps plus they get on deposits (net interest spread). And their problem is that they treat an investment account, in their minds, like a "bank" asset.

fritz's picture
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bancofamigo wrote:You can tell by Lewis' interview that he is sensitive to the fact that he overpaid for Merrill. The guy has a Napoleon complex and refuses to be told he is wrong. The package requires they get 25% growth to get the 25% stock piece (for those under 1.75MM). Lewis and his yes men think they should grow at 25% - the acceptable level when I was at BAI. To you Merrill guys - When I was at BofA - they cut fee based by 15% because (in 1996) the "regulators made them" which is total BS. The bankers as someone has said before cannot get over the fact that the margins on wealth management assets are so low compared to the 300 Bps plus they get on deposits (net interest spread). And their problem is that they treat an investment account, in their minds, like a "bank" asset.
 
25% growth on T-12 from 10-7 thu 9-08..that sounds like an esy starting point.  Only 40% in the hole to start  Sign me up..Probably better to take McCain now at 7-1 and thats a real reach.

BlackKnight's picture
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I've been in the business for just five years but I can tell you that it is INCREDIBLY EASY to lift account from Merrill Lynch.  I would have to say that 80 - 90% of the accounts I have transferred in the past five years have been from ML.
 
Merrill brokers think more of themselves than their clients do.

saveteran's picture
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Joined: 2008-10-24

I'm an LOS 5 producer at ML and am 1st or 2nd quintile in all areas. This retention package completely ignores the rising stars at ML and has me scratching my head. Why wouldn't they want to make up and comers happy. I'm 90% out the door now and I wanted to stay. BTW, the deals remain as rich as ever for an FA with my metrics.

bondo's picture
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My office was pretty quiet today and I heard the same about the others in our complex.  I cannot imagine what it will be like when the new compensation plan comes out.

bancofamigo's picture
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I meant they cut fee based in 2006.

Broker Fee's picture
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With the current environment ML brokers' producing 750k plus will likely stay with BAC & a great many of them will probably stay simply because they will not want to suffer the pain involved in moving a large book in a crappy market.
 
Brokers producing under 749k will likely flee for the hills like fat rats jumping off of a sinking ship. They will point to the "non compete' clause in the agreement as the prime motive for moving their books but it also doesn't hurt that they will be able to capture terms much greater than 20% on the street either thru another wirehouse (UBS, MS, SB) or by going the independent route (RJ, LPL, Commonwealth) & declaring their freedom from the wirehouse model.
 
Either way BAC will lose a ton of rep's & it's pretty apparent from the way that BAC structured the offer that they really only want to keep the very top producers & they are telling everyone else (under 749k) to hit the bricks.
 
Set of steak knives anyone?
 

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Fritz, I am on for McCain plus 5 by the way.

As far as moving accounts from one to another - your book is as good as you are. If you sell your firm you have made a horrible mistake. If you have educated yourself (like CFP) and maintain contact with more than the "hang in there" then your clients will see more than the firm. I have moved accounts from Indies, firms etc. I got the accounts because the reps were either not taking care of the clients or failed to implement a needs based approach (and therefore sold them the American Funds du jour).

Back to point - ML reps are getting the shaft from a firm that has absolutely thrown them under the bus. Granted, it wasn't Thain's fault - his patient had a sucking chest wound after ESON leverage the balance sheet up by 30 times. Thain is a hero for getting .8595 shares of BofA and Lewis is the dim bulb he always will be. But the Private Client side is not to blame here and they are getting the rusty.

Any of you that are 1-2 quintile that are under the line due to time in the saddle ought to look around. The future will not be brighter with the team you are about to sign on with.

Bonded's picture
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Joined: 2008-10-24

just so you know, been involved with 4 BAC mergers. None of the guys you see here signing up today will still be here a year from now. Thats from the horses mouth. Its a fact. they smile, and then you see all of these charlotte people talking too loud, smiling too much, laughing too often, and you'll say these people are stupid, and way too happy. They are happy because they know they have jobs and you don't! Beware non-producers, because payback for the crap that you people wrought on merrill et al... is soon to be vistited upon you. Bac for 10+. Mark my words.

cubfan1404's picture
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Can somebody help me out?  I've been reading over the legal documents they gave us today (I'm getting a low six figure up-front payout, not bad for staying put and doing the same thing I was going to do anyway).  One thing I can't find anywhere: do we get taxed up-front on this or just over time as they pay back the loan?  Obviously Uncle Sam's 36% makes a big difference between "great" and "good".  Any help would be appreciated.

BACFA's picture
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Most likely over time.  In the past, you would write a check to BAC every year for the prorated portion and they would write a check back to you, less the taxes.

cubfan1404's picture
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Ok, that make sense.  That's what the documentation states...they're giving us a monthly service bonus every month we stay around, which equals the pro-rated monthly amount of the loan, and the taxes are taken out of that.  So I get all the $$ up front but I should escrow for taxes until my net production gets high enough to cover the extra taxes every month.  Thanks for the clarification.

donttell's picture
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You have to pay the taxes over the term of the note (7 years)  It's a draw that comes out of your check monthly.

Bonded's picture
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we used to do it once a year, so monthly out of production would be good.

bancofamigo's picture
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Wait though. BofA also charges 5% imputed interest and it hits payroll as income not as a bonus. That means it also gets the 7.65% for SS and Medicare. UBS counts the 100% plus as bonus (no FICA) and it posts on the monthly comp as gross earnings but hits only against the FIT and State lines. When I was at Banc of Amigo I had to write a check each year for (in this case) 1/7th of the amount gross, then I'd get 45% back net. Welcome to Amerika! My advice is to keep one year liquid (or semi) now, then save each month to accumulate the next year etc.

bancofamigo's picture
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One other thing, BofA has not signed the "protocol".

FVDA_Trade-PMR's picture
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Can someone clarify the Merrill Lynch retention package.  Is the bulk of the money in the form of a forgivable note based on meeting certain GDC requirements each and every year?  Be interesting for those who accept the package how GDC production might be affected with the turmoil in the markets we've all been experiencing.

 
It's my understanding some forgivable notes are viewed as IRS Taxable with each year the portfion of the loan is forgiven.  Plus, another article I read mentioned certain more restrictive clauses.  I'm not sure if this is true or not as I have not seen the actual language of the retention package.
 
It seems based on the articles I've read -- sounds like a lot of "soul selling" to me.  Tread carefully!

SFEZ's picture
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Joined: 2008-10-25

What is GDC? gross production? No annual requirement mentioned.....It's a 7 year forgiveable loan.My understanding is all these types of deals work like that......Get the money whole up front and as each portion is forgiven, it is taxable in that year............. Anyway, some other points:1- They did what the rumors basically said they would........pay the bigger producers real money to stay........While a producer doing north of 1mm can get more leaving, it should be enough to keep them at ML/BAC......2- They threw a bone to the guys doing under 1mm.........so those guys are probably in play.........3- The guys doing 250-500K definitely got screwed, and they are definitely in play too..........I think the deal sucks, but the current environment allows for it......We'll see what happens over the next 6-12 months, once the merger is completed and the current market environment (hopefully) improves.

Akkula's picture
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Joined: 2008-02-17

I think that brand new rookies got the best retention bonus.  I have a feeling a lot of account redistributions are about to happen and maybe a few smaller accounts will stick around.

Rugby's picture
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Joined: 2006-06-06

So a MER FA doing 800K gets a check for 400k.  In return he signs an exclusive 7 yr. non-compete keeping his clients there for that duration.  Points to ponder:-  From what someone else posted..you cannot pay back your loan or portion after 3 years (when market may be better) to null the non-compete?  That is scary if true.-  Will the grid stay the same?  Do you trust Ken Lewis to not get that $$ back over 7 years?  60 Minutes comments....-  What will be compliance be like?  Now they you're dealing with a huge bank...."TARP says now" (i.e. Obama, & Pelosi said we can't do X....)Tough call in the current environment.  The % of these 500M-1MM producers who leave may serve a proxy of what the market will be like for the next 7 years.  Why not go Indy and get that 23%-50% bonus each and every year by not selling your book for 25-50% one time?   It seems that BAC is getting a steal.  Are they going to save you or your clients from this big bad bear martket?What do they bring to the client that other shops cannot? 

Gordon Gekko's picture
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Joined: 2007-07-08

Anyone see the movie "Ghost Rider" with Nicholas Cage? Using that as an analogy, Ken Lewis is the devil and ML brokers are the Ghost Rider. Just sign at the dotted line...

bondo's picture
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I haven't seen the actual retention package and I do not think anyone in our office has as the manager was out this past week.  Once those come out it could be really ugly.
 
Could be a very good thing for the newbies, but will lose some good senior guys.
 
I think the days of Mother Merrill are officially over.

SuperRecruiter's picture
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SuperRecruiter TO THE RESCUE!

SuperRecruiter's picture
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bondo wrote:I haven't seen the actual retention package and I do not think anyone in our office has as the manager was out this past week.  Once those come out it could be really ugly.
 
Could be a very good thing for the newbies, but will lose some good senior guys.
 
I think the days of Mother Merrill are officially over.Yeah, you guys are hosed!

SuperRecruiter's picture
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Yay tractor drivers!

bondo's picture
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SuperRecruiter wrote: bondo wrote:I haven't seen the actual retention package and I do not think anyone in our office has as the manager was out this past week.  Once those come out it could be really ugly.
 
Could be a very good thing for the newbies, but will lose some good senior guys.
 
I think the days of Mother Merrill are officially over.Check the first page of this post, I gave a complete breakdown of the retention package.
 
I saw your summary of the compensation.  I am referring to the actual contract that spells out all the details such as the non-compete.

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