| NEW YORK, April 13
NEW YORK, April 13 Hundreds of legacy Bank of
America brokers may form the next wave of departures
from Merrill Lynch after many recently pocketed their retention
bonuses, recruiters and former brokers say.
While plenty of attention is paid to the hundreds of Merrill
brokers who quit since BofA acquired the firm in 2008, citing
the negatives of working for a big bank, recruiters expect
similar numbers to leave out of roughly 1,000 Merrill brokers
who had worked for Bank of America Investment Services.
One big reason is brokers who signed three-year retention
deals are now free to take the money and run, recruiters said.
Also helping fuel the departures is annoyance at account
maintenance fees that now apply to clients, say former brokers.
In October 2008, Bank of America brokers generating at least
$350,000 in the prior year were awarded a 20 percent retention
bonus payable over three years. Brokers generating $2 million,
could receive up to 50 percent as a bonus.
Merrill brokers generating at least $1.75 million received
seven-year packages equal to 100 percent of annual revenue.
The final check of the BofA packages was paid in February
but came with no obligation to stay, said a recruiter familiar
with the Merrill Lynch wealth management business. Dozens of
these brokers have begun to depart.
"I know of several teams who are leaving. Some are just
going to retire," said Margaret Lech-Loubet, a 28-year veteran
of BofA and its predecessors who joined UBS wealth Management in
Beverly Hills, California, last August.
One big motivator is that Merrill Lynch account fees, which
had been waived for legacy BofA customers, took effect for the
first time in January, former brokers said. These fees, ranging
from $150 to $300 a year are applied to all accounts, even
customers with tens of millions of dollars in assets.
"They keep grinding advisers on commissions and grinding
clients on fees," said Bob Iglehart, a Palm Desert, California,
adviser whose team left Merrill last year to join RBC Wealth
Management. "This is the first year where Bank of
America clients are going to get hit with account maintenance
fees. A lot of clients are getting notices."
It's a standard practice among brokerages to charge
"maintenance" fees on accounts that fall below certain minimums,
to help firms cover their overhead expenses. Brokers on some
occasions waive those fees to preserve a relationship.
Morgan Stanley Smith Barney charges an annual account
fee ranging from $75 to $150 a year for households under $1
million in assets or clients who generate less than $10,000 of
annual revenue. At Wells Fargo Advisors, the threshold
is $250,000 in assets.
But it's another thing to assess such fees on clients
generating thousands of dollars in fees and commissions, some
former brokers said.
"Are you really going to charge a client like that $300?"
said Lech-Loubet, who generates about $1.7 million of
commissions a year trading $1.2 billion of bonds for clients.
Lech-Loubet said she joined UBS because its municipal
bond desk did a better job executing on trades to the benefit of
"As always, advisers have discretion over client fees," said
Merrill spokeswoman Selena Morris. She also said advisers have
access to multiple platforms and trading desks, an arrangement
known as "open architecture" that offers investors better access
and pricing for securities.
SOME LEGACY BROKERS THRIVE
There are also, to be sure, legacy BofA advisers who have
thrived as part of Merrill, which has one of the strongest
brands in financial services and has invested in technology and
training to help its advisers boost revenue.
James Roeske, an adviser who started his career in 2000 at
Merrill but jumped to BofA in 2003, said being part of Merrill
again has helped his team amass $215 million in client assets
and generate $2.3 million a year.
"Coming from the bank side, we always had greater banking
capabilities but our brokerage platform was falling behind," he
said. The Merrill deal "was an instant fix for me."
Bank of America rescued Merrill from a likely collapse
during the 2008 financial crisis with a $50 billion takeover,
but it was Merrill's iconic 16,000-strong brokerage that took
the lead in wealth management.
Merrill's broker-dealer unit folded in 2,000 Bank of America
advisers amassed through mergers with Security Pacific Bank,
Montgomery Securities, NationsBank, FleetBoston and others.
Hundreds of these advisers left or were forced out after the
merger. Like other branch-based brokers, they had benefited from
in-house referrals and, on average, were less productive than
Merrill's, said Bing Waldert, research director for financial
services consulting firm Cerulli Associates.
Many bank-based brokers - a group that typically sells
stocks, bonds and mutual funds to smaller investors - didn't fit
the mold of a big Wall Street brokerage where advisers must
develop their own book of business, Waldert said.
Merrill's Roeske acknowledged the loss of referrals is a
challenge for brokers making the switch.
"If you're having clients handed to you, it's a lot
different than exceeding the expectations of clients and then
winning new business through them," Roeske said.