The recruiting war for top brokers remains fierce. The latest evidence of the fight to win million-dollar producers involves the industry’s biggest firms. Earlier this month, a Bridgeport, Conn., judge slapped a temporary restraining order (TRO) on a pair of sibling reps after they ditched their jobs at Merrill Lynch’s Stamford branch to join Morgan Stanley.
The brokers, Andrew Livesay and Darden Livesay Jr., left Merrill on July 28 and within days the firm sued for breach of contract and fiduciary duties. Merrill says the Livesays are plotting to wrongfully poach Merrill clients. (Unlike some brokerage firms, Merrill believes that the firm—not the advisor—owns the client relationship.)
Merrill submitted employment documents to Judge Stefan Underhill that show the brokers agreed not to solicit Merrill customers for a period of one year after the departure date. “The Livesays took proprietary information that belonged to Merrill Lynch,” says Merrill spokesman Mark Herr. “Because of this, we acted to stop them from using something that did not belong to them and never should have been taken by them in the first place.” Attorneys for the Livesays did not return phone calls seeking comment.
Based on their production, it’s understandable why Merrill is steamed over their departure. The two brothers managed $280 million in client assets and generated $1.3 million in commissions for Merrill, according to a source familiar with the matter.
The battle for brokers between Merrill and Morgan Stanley has been an ongoing saga ever since James Gorman left Merrill to head up Morgan Stanley’s retail brokerage arm. And Merrill has long used the TRO as a weapon against its departing financial consultants.
In March, Gorman was freed by a New York State judge of a TRO of his own that prevented him from raiding Merrill Lynch’s brokerage ranks. New York Supreme Court Judge Emily Goodman dissolved the order she first issued the previous week in response to a memo filed by Merrill after Gorman hired three of his former Merrill colleagues just five weeks into his new job.
Merrill argued that Gorman had violated his non-solicitation agreement, under which he agreed not to recruit any Merrill personnel for one year following his departure in February. Merrill also stated in its brief to the court that Gorman could do “irreparable harm” if he lures more recruits to Morgan Stanley.
While its army of brokers is still tops in the industry—15,520 strong—the firm is concerned about losing quality advisors to gaudy signing bonuses that have gone as high as 200 percent of trailing 12-months production in some cases. In June, 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 talks—or have had talks—with other companies about leaving.
