Merrill, Morgan offer 330% recruiting packages
By Bruce Kelly
November 15, 2009, 6:01 AM EST
The broker-recruiting wars are heating up, with wirehouses jacking up their offers to new heights to lure more representatives in 2010.
Morgan Stanley Smith Barney LLC and Merrill Lynch & Co. Inc.'s Global Wealth Management unit are going toe-to-toe by offering tops reps a recruiting package of up to 330% of annual production.
Those levels are the highest ever offered, sources said.
But because the deals are complicated and tied to a rep's ability to increase business, it's impossible to know how much each broker ultimately will receive.
Meanwhile, many wonder how UBS and its new chief, former Merrill Lynch honcho Robert McCann, will react. Some expect him to re-lease details of a recruiting package as soon as this week that will approach the deals of Merrill Lynch and Morgan Stanley Smith Barney.
Robert McCann: A new UBS recruitment package may be coming.
Before Mr. McCann landed at UBS at the end of last month, the firm was flirting with the idea of giving brokers a recruiting bonus of 365%, sources said. But that deal was pulled off the table after Mr. McCann's arrival, and UBS is currently offering recruits deals in the range of 200% to 220% of their previous year's fees and commissions.
Merrill has 15,000 reps, while Morgan Stanley Smith Barney has 18,160 and UBS 7,300.
A little more than a year after Wall Street was walloped by the credit crisis, the large remaining firms are hungrier than ever for reps who rank among the top fifth of their firms' producers.
“There's still a great amount of competition and demand for the best-performing and targeted teams,” said Andy Tasnady, founder of Tasnady Associates LLC, a compensation consulting firm.
“Firms still think it's a profitable purchase for them to make,” he said. “Internal growth is off, so firms have to buy it.”
Darin Manis: The recruiting packages "are based on an increase."
The deals are complicated. It would take five years for the rep to reach the top compensation level, which would paid out in the form of a forgivable loan over nine years.
In the case of the Morgan Stanley Smith Barney offer, reps need to increase assets and production by 50% over the first five years, with specific growth targets set for each year.
The new deals are 80 percentage points greater than the old ones, but brokers have two more years to reach the production level tied to the top compensation, said Darin Manis, who heads the recruiting firm RJ Makay.
The recruiting packages “are based on an increase. If advisers exceed production, it's good for firms,” Mr. Manis said.
UBS' next move?
When asked about the potential for a beefed-up package for recruits, UBS spokesman Kris Kagel said: “UBS continues to look to recruit top-tier advisers who are attracted to our global platform, commitment to clients and diverse product offerings.”
Last Monday, UBS announced a new retail management team that includes six current members of the executive committee and four new hires from Merrill Lynch — John Brown, Brian Hull, Robert Mulholland and Paula Polito. Their roles at UBS weren't specified.
Wells Fargo Advisors LLC, which has 16,000 reps, also is keeping mum any changes to its recruiting offer.
“We agree that today, the packages are as generous as ever for experienced financial advisers,” said spokeswoman Teresa Dougherty. “And with this volatile market, we certainly remain competitive.”
Meanwhile, some regional firms are increasing their top offers, though at much more modest levels than the major wirehouses.
For example, Raymond James & Associates Inc., the employee broker-dealer of Raymond James Financial Inc., last month increased its top deal to 100% of a rep's previous year's fees and commissions, from 80%.
E-mail Bruce Kelly at firstname.lastname@example.org.