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January 15, 2020

Merrill Sticks to Hiring Novices, Freezing Out Veterans, Staying in Protocol

by Mason Braswell
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Merrill-Sticks-To-Hiring-Novices-Freezing-Out-Veterans-Staying-In-Protocol
Eric Audras/ PhotoAlto Agency RF Collections/Getty Images

A senior Merilll Lynch executive on Wednesday put some numbers to the wirehouse’s watered-down recruiting strategy, saying it is keeping costs in control without sacrificing revenue.

Merrill added 221 new advisors to its Thundering Herd ranks in 2019, less than the 250 to 300 it hired before instituting a freeze on hiring experienced brokers from other firms three years ago, according to a senior executive who spoke on condition of anonymity.

The new brokers are less expensive, he added, with three-quarters of them (168) joining Merrill’s Accelerated Growth Program (AGP) that targets brokers with two-to-ten years of experience, and the rest (53) working in ”community markets” that are smaller than the average Merrill community and are far from Bank of America branches. (Merrill recruited 98 AGP brokers in 2018, its first full year of existence.)

Merrill offers AGP recruits a three-year guaranteed salary matching their previous year’s earnings, plus payouts on new revenue based off the firm’s traditional grid. Since most hale from regional firms, small-office national firms like Edward Jones and independent registered investment advisors, they earned less than the typical wirehouse competitors Merrill used to pursue.

The strategy fulfills the “responsible growth” mantra of Merrill parent Bank of America, which keeps a tight focus on expenses. The experienced brokers Merrill previously competed for got cash signing bonuses in the form of forgivable loans that can be multiples of the revenue they produced in the previous year at their former firms.

The executive credited the strategy with helping Merrill report record pretax profit margin of 26.5% in 2019 and record pretax income of $4.3 billion.

He also denied speculation that Merrill will drop out of the Protocol for Broker Recruiting, which lets advisors leave without fear of being sued if they call former clients. Morgan Stanley Wealth Management and UBS Wealth Management both pulled out of the Protocol when they contracted recruiting several years ago, in an effort to keep their experienced producers from leaving.

Merrill’s “competitive attrition” has been a manageable 4% of its force of some 14,000 experienced brokers over the past four years, and fell to 3.4% in the just-ended quarter, the executive said.

Merrill, which decades ago was Wall Street’s biggest brokerage firm, also continues to develop brokers through its 43-month training program that has nurtured much of the retail brokerage industry in the U.S. The program currently has around 3,500 advisor candidates.

The Thundering Herd also is pouring money this year into a new program to upgrade the skills of its 6,500 client sales associates, the executive said. The program is likely to motivate a growing number of them to shift to becoming full-fledge advisors, he said. Merrill also is working more closely with salaried Merrill Edge brokers called “financial solutions advisors,” and expects to house around 2,000 of them in Merrill brokerage offices over the next few years.

The shifts have led some headhunters and old-time brokers to say that Merrill will ultimately adopt a salary-plus-bonus structure for all of its advisors to replace the grid-based eat-what-you-kill compensation that motivates traditional brokers. Bank of America CEO Brian Moynihan said on the bank’s earnings call Wednesday morning that he has no plans to change the compensation scheme at Merrill Lynch Wealth Management

The Merrill Wealth executive dismissed the salary-plus-bonus rumors as alarmist.

“We are very committed to maintaining our focus on organic growth,” he said. “And we want to make sure the priority of our leadership in the field is enabling and supporting the growth of our existing financial advisors. Full stop.”

— Jed Horowitz contributed to this story.

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Comments (10)
  • on Jan 15 2020, Anon says:

    When do they get their new bright red cell phones

    > Reply to Anon
  • on Jan 15 2020, Leonardo says:

    Salary plus bonus in less that 4 years. Anyone want to bet?

    > Reply to Leonardo
    • on Jan 15 2020, Over The Bull says:

      You think it will be that long?? I am guessing this time next year we will be reading the announcement….

      > Reply to Over The Bull
    • on Jan 16 2020, Andy Siegg says:

      Trying to mask attrition of big producers by hiring bank advisors who cannot bring assets -what a strategy

      > Reply to Andy Siegg
  • on Jan 15 2020, No bull says:

    Never believe BOA when they say they have no plans of doing something. Because they do. Ever met an honest banker? Me neither. Greed is all they know. It’s all a bunch of bull. Merrill has never had a successful internal advisor development program. Just ask the thousands who failed. Nothing but a pyramid scheme steal clients from recruits

    > Reply to No bull
  • on Jan 16 2020, Anonymous says:

    How great is it That merrill is still in protocol . It means that it’s giving its advisors the option to leave freely . And at the same time retention is at an all time high … and look even with that merrill has added over 200 new advisors to the thundering heard … its because production is up and Clients love the total merrill platform .. MER IS BACK ON TOP

    > Reply to Anonymous
    • on Jan 16 2020, Sara says:

      The 4th Qu of 2018 was lousy for the brokerage business – and the 4th qu of 2019 was fantastic. Most of Merrill’s experienced FA production is up 20% or more last Quarter over the 4th Qu of 2018. Yet Merrill’s revenue was down – as was their profits!!! Reason: loss of experienced/successful FA’s. The only reason it wasn’t worse are the remaining experienced FA’s are doing extremely well. The “novices” they are hiring are adding nothing!!!

      > Reply to Sara
    • on Jan 16 2020, Over The Bull says:

      I am assuming this is all sarcasm….. Otherwise, someone is really needs to not believe every lame attempt their PR team uses to put a spin on what is really going on at Bank of America’s (Opps, I mean ‘Merrill’)…

      > Reply to Over The Bull
      • on Jan 16 2020, C.Wolf says:

        Lol, they said it. Still in protocol. The most expensive asset is there advisors. Moynihan said it. They want u gone! And I suspect that broker will leave when the market turns south. Because they can never time the market. Glad I’m out

        > Reply to C.Wolf
  • on Jan 16 2020, Diogenes says:

    Well as usual these comment read like Boston Red Sox fans trying to defame the New York Yankee legacy… Long after we all are gone the Thundering Herd will still be charging.

    > Reply to Diogenes

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