Bank of America Merrill Lynch has stated that it will hire 2,000 more brokers to its global wealth management division during next year, says Aite Group, a financial services consultancy. We've written extensively on this subject.
But, I would ask, from where will ML pinch these advisors? And how much will it cost them in up-front deals?
Recruiting deals have gotten out of control and FAs who have wanted to jump, seemed to do so in the first half of last year, with the rate of firm-hopping slowing in the latter months of 2009. Gorman at Morgan Stanley said the advisor movement would level off this year, and Bob McCann told us that he was against some of the rich sign-on bonuses. Indeed, recruiting veteran FAs costs so much, firms are opening their training programs which they had de-emphasized over the past couple of years.
But recruiter Mindy Diamond tells me that deals are still rich, relative to historical averages, and still are reaching about 280 percent of production. She also says that it is true that advisors who have not moved (last year was a estimated to be a record, with about 22,000 FAs switching firms) are "lifers" who are simply loath to move as a matter of principle.
Aite Group">Aite Group research director Alois Pirker commented on the importance of headcount in the brokerage business, and the race taking place between the major players.
According to Alois:
"The announcement of Bank of America Merrill Lynch to add 2,000 retail brokers to the already 15,000 strong broker force shows how important headcount is in this business. Merrill’s manpower was recently overtaken by the combined broker force of Morgan Stanley and Citi's Smith Barney. The ambitious goals that Morgan Stanley's CEO James Goreman had announced yesterday show that his firm is planning to rival Merrill Lynch not only in headcount, but that he also plans to steal the crown as brokerage powerhouse from Merrill. BofA realizes that their opportunities lie within the client base of the retail banking side. If this cross-selling effort is done well, Merrill's asset-base could see a significant boost. The tricky aspect of this plan is that it will take a bank-brokerage type of unit, paired with online brokerage capabilities and call center-based brokers in order to make this work in a scalable way. The first was cut back at the beginning of the integration with Bank of America, the other two aspects are relatively new territory for Merrill as its core clientele has traditionally been served through a high-touch advice model. Ms. Krawcheck's experience from Citi will come in handy in this difficult endeavor."