Merrill Offers Bounty for Recruiting Novice Brokers
While it has slammed the brakes on hiring expensive veteran advisors, Merrill Lynch Wealth is incentivizing outside recruiters to bring up-and-comers to its ranks.
Outside recruiters said that the Bank of America-owned brokerage giant earlier this month told them that it will pay them at least $25,000 for recruits who qualify for its “Accelerated Growth Program (AGP),” which it introduced about a year ago as a pilot it was then calling “Professional Transitional Advisors (PTA).”
“We’ve seen good early success through this program,” Merrill spokesman Matt Card said in an email confirming the new incentive. “As part of this strategy, and in an effort to appropriately compensate recruiters, we recently updated our approach to referral payments upon the hiring of an early-career financial professional.”
AGP is focused on developing a new generation of advisors who have three to eight years of brokerage experience and are in the first and second quintiles of producers with similar years of experience. The effort comes as Merrill and many of its rivals are contending with a graying advisor population whose average age is in the 50s, according to consulting firm Cerulli Associates, at the same time that big firms are reluctant to pay expensive signing bonuses to veterans.
Brokerage firms typically pay outside recruiters a fee equal to 6% of a new hire’s “trailing-12 production”—the fees and commissions brought to their firm in the previous 12 months. Under Merrill’s new offer, it will pay the higher of 6% or $25,000. For a broker producing $200,000—a relatively low production rate but equivalent to what wirehouses expect as a minimum from people completing their training programs—the guarantee would more than double a headhunter’s fee.
Wells Fargo Advisors recently extended a special fee offer of 10% of a recruit’s production to headhunters as it attempts to replenish its shrinking brokerage force, but the deal is set to expire at the end of this year. The Merrill offer as of now has not expiration date, Card said.
He declined to say how many brokers Merrill has hired into its AGP program since its introduction.
Other U.S. firms such as UBS Wealth Management and Morgan Stanley also are experimenting with alternative ways of refreshing their sales forces outside of conventional recruiting of experienced brokers. Each has been publicizing programs to lure people starting second careers, a demographic long mined by Edward Jones, which operates the brokerage industry’s largest franchise of single-broker offices in the U.S.
Merrill ended the second quarter with 14,800 brokers, flat with its wealth headcount 12 months earlier, but Bank of America has been adding brokers to its separately managed Merrill Edge channel, a no-frills alternative for customers seeking investment help. The channel had 2,622 “financial solution advisors” as of June 30, up by 466 from 12 month earlier.
Brokers joining the Accelerated Growth Program are guaranteed an annual salary for three years equivalent to what they were earning at their previous firm, in addition to traditional grid-based compensation. The structure is more appealing to a relatively junior advisor than the typical wirehouse recruiting offer that pays 150% of trailing-12 production in the form of a nine-year forgivable loan, said a recruiter who spoke on condition of anonymity.
Many AGP brokers are affiliating with Merrill’s new “community markets” program, which is focused on servicing investors in towns and cities where neither Bank of America nor Merrill Lynch has a significant presence.