If you are one of Merrill Lynchâ€™s best financial consultants and you have been flirting with other brokerages or financial-planning firms, watch out: You could get hit with a Merrill loyalty statement.
Merrill Lynch acknowledged that it has asked some of its best producers -- ones it suspects are actively pursuing new jobs -- to answer a series of questions about whether they are in talksâ€”or have had talksâ€”with other companies about leaving. Further, the questionnaire asks if the FCs have already given a commitment to join a rival financial-services firm. The firm says it has produced the two-page document entitled, Present Employee Interview Questionnaire, in rare cases and only when the firm had proof of an advisorâ€™s contact with rivals.
â€śThe document has only been used in a handful of cases where a manager has concrete information that a financial advisor plans to move to a competitor and may have used Merrill Lynch proprietary information or contacted clients in advance of that move,â€ť says Jennifer Grigas, a Merrill spokeswoman. In a quick (but highly unscientific) survey of Merrill employees past and present, none had heard or seen such a document.
According to published reports, the questionnaire asks: â€śHave you told any firm that you intend to join the firm?â€ť And, â€śThe firm would like you to remain in our employ. Will you make a commitment to stay?â€ť The questionnaire also asks brokers to sign it and submit it, which would presumably be kept on file for Merrillâ€™s records.
The existence of such a document underscores the fierce nature of the recruiting war being waged over top producers among retail brokerage firms in recent months. Recruiters say that top advisors industrywideâ€”$1 million producers who are largely fee-basedâ€”are being romanced by rivals: Signing bonuses of 150 percent to 200 percent of trailing 12-months production (including cash and stock) are being inked. And Merrill even sought a temporary restraining order against Morgan Stanleyâ€™s retail brokerage head James Gorman (who ran the retail brokerage business at Merrill) to prevent him from recruiting current and recent Merrill employees. A few high-profile employees did decamp Merrill for Morgan this year, after Gormanâ€™s arrival.
â€śIt goes to show how crazy recruiting is,â€ť says a former wirehouse executive who now works in asset management. He wonders if Merrill is using the same tactics itâ€™s trying to combat. â€śI think itâ€™s sort of duplicitous when the same firm that is asking its brokers to pledge their allegiance is going out and recruiting Piper Jaffray brokers in Minneapolis away from UBS,â€ť he says.
Either way, an FC probably shouldnâ€™t fill out and sign the questionnaire. In fact, one labor lawyer says that Merrill cannot force its brokers to sign the documentâ€”and recommends not signing it under any circumstances. â€śUnder federal labor law, an employee cannot be required to refrain from discussion with other employers about working conditions and pay,â€ť says Mark Thierman, a labor attorney who has successfully sued Merrill Lynch, Morgan Stanley and UBS for a combined $165 million over forfeited overtime pay. In California, employers are prohibited from imposing a nonsolicitation rule, he adds.
Howard Diamond, an attorney and recruiter with Diamond Consultants, also recommends against signing the document, because, he reasons, it could come back to haunt. â€śIt sets them up for a fallâ€ť down the road if circumstances change and another offer pops up.