Fate of Merrill brokers still a question mark

Merrill Lynch & Co. Inc. is patting itself on the back for convincing 97% of its brokers who were offered a retention package by Bank of America Corp. to sign on to the deal.

But the firm’s celebration may be a bit premature, as recruiters speculate that the coming culture clash may result in Merrill’s losing 25% to 30% of its producers.

As the Nov. 14 deadline for signing the retention deal approached, officials at the New York-based brokerage giant let it be known that more than 90% of eligible brokers had accepted it.

Even better, 99% of top producers ($1.75 million or more in annual gross) had signed on, Merrill retail chief Bob McCann told Bloomberg News.

The spin worked. Head-lines read:

• “Bank of America Retains 99% of Merrill’s Top Brokers” (Bloomberg)

• “Bulk of top Merrill brokers to join BofA” (Thomson Reuters)

• “Merrill reps overwhelmingly go for BofA deal” (InvestmentNews)

The headlines left the clear impression that an overwhelming number of Merrill reps will stay with Charlotte, N.C.-based BofA.

TOO SOON TO TELL

In reality, it’s too soon to tell how many may ultimately stick around.

Some Merrill doubters predict an unfolding disaster as the mass market bank culture clashes head-on with the wealth management crowd at Merrill, which has the insular belief that the Merrill way is, and always has been, the best way.

True-blue Merrill pros are in for a shock, these observers said, because things won’t stay the same under the yoke of Bank of America.

“Merrill Lynch is gone, and it’s not going to be replaced,” said Russ Gerson, chief executive of The Gerson Group of New York.

“There is going to be a major cultural clash,” he said.

If a Merrill rep needed more time to make a decision about his or her future, there probably was no reason not to sign the deal, said Patrick J. Burns, whose eponymous Beverly Hills, Calif., firm represents brokers who go independent.

It helped that Bank of America this month added language to its contract saying it expects to follow the recruitment protocol, he said.

“A lot of Merrill guys were happy Bank of America [will follow] the protocol,” said an industry recruiter who asked not to be identified.

“It took a bit of pressure off of signing,” the recruiter said.

The protocol allows brokers moving between two signatory firms to take and use customer contact information.

Clearly, some Merrill reps who signed the Bank of America contract still entertain thoughts of leaving. And recruiters and competing firms say they’re hearing from many wirehouse reps — and especially from Merrill brokers — who are scoping out new employers.

BAD TIMING

But this is a terrible time to move a book, brokers and recruiters said. And once the market and clients settle down, Merrill brokers can always pay back the unforgiven portion of their note and leave.

What’s more, since it can take six to nine months to complete a move, the full impact of the Sept. 15 merger announcement won’t be seen until well into next year.

Meanwhile, many Merrill brokers are being wooed. Top Merrill producers should have no trouble getting double the 100% of production of the Bank of America offer.

For Merrill reps heavily involved in fee-based business, opportunities to set up investment advisory firms or join established wealth management boutiques probably never have been greater, assuming a willingness to give up a rich transition package.

Yet some Merrill brokers scoff at talk of their colleagues’ jumping from Mother Merrill. The firm has many lifers who’ve never worked anywhere else, and they are now getting paid to stay put.

Merrill reps concerned about life at Bank of America should consider the alternatives, Mr. Gerson said.

“Guess what? It’s a stable organization,” he said. “Citigroup [Inc. of New York] is not stable. Morgan Stanley [of New York] is not stable. Where do [unhappy Merrill brokers] want to go?”

While voicing suspicions about Bank of America’s plans, one Merrill rep in the Northeast who asked not to be identified said he feels lucky.

Without the bank, he said, “we’d be out of business.”

Whatever the concerns, no one expects anything like Merrill’s botched takeover of The Advest Group Inc. of Hartford, Conn., in 2005. The firm reportedly had lost 80% of Advest producers by the time the dust settled.

BETTER PRODUCERS TARGETED

Ironically, though, while Bank of America targeted better producers with its retention deal, its best cultural fit could be among Merrill’s midtier reps, many of whom didn’t get a package.

These solid, average brokers — with no problems, few complaints and fewer options to go elsewhere — historically have been the “workhorses” of retail, Mr. Gerson said.

Perhaps incorrectly, employers are betting these brokers won’t keep up in hard times, he said.

E-mail Dan Jamieson at [email protected].

Related Topics: Merrill Lynch