FinancialCounsel

Recruitment Deals Slim Down But Still Are About 230% For Million Dollar Producers

Although the press is reporting that recruitment deals are slimming down, they're still very large.  Recall that only a couple of years ago, there were 100% of trailing 12 month commission deals being made.  That has now changed.  We've reached the peak, being about 250% - 260% of trailing 12 for brokers who generate $1 million a year or more. 

And firms are trimming back, but not by much.  Smith Barney has announced that its total deals are down to about 230%.   Merrill Lynch has said that it is doing the same.  Morgan Stanley has said that it's remaining competitive.  The price tag of course comes with promissory note terms of as much as 9 years, but attorneys at SNSFE work with reps to insure that promissory note terms and employment agreement terms are negotiated to fully protect the interest of the reps. 

Now there are some other firms out there that are not paying this kind of money but are doing other things to attract wirehouse reps.  Those are the regionals, for example, who are putting more emphasis on back-end incentives.  Those also include the custodians for investment advisers like Charles Schwab and TD and Fidelity who are putting together other benefits to encourage reps to join their firms.

Merrill Lynch Brokers' November 14th D-Day In Deciding Whether Or Not To Sign On With Bank Of America Is Just The Beginning Of The Transition Analysis

November 14, 2008.  That's D-Day for Merrill Lynch brokers who need to decide whether or not to sign on with Bank of America.  It's not surprising that more than 90% of Merrill Lynch brokers have decided to stay on with Bank of America according to Wall Street Journal Reports.  That's not because of a great arrangement.  Instead, it's because Merrill brokers were given only three weeks to review the deal, to interview with competitors, to negotiate the terms of their employment agreements and promissory notes with any competitors who chose to offer them an enticing package to move. 

But Merrill Lynch brokers have some comfort moving forward, at least short-term.  They were able to convince Merrill Lynch and Bank of America to agree to the protocol protection for moving customer accounts if they choose to move to a new firm. 

Merrill Lynch brokers and staff are highly paid.  That's part of the culture at Merrill Lynch.  Will that culture clash at Bank of America?  It certainly will.  BofA Chief Executive Ken Lewis has vowed to cut $7 billion of cost or 11% of the combined firm's $61.1 billion in cost for 2007.  And he's already said that staffers at Merrill Lynch are making a lot more money than staff people at Bank of America and that "won't last."

In addition, there's a culture clash as the securities firm of Merrill Lynch, known for it's independent streak, merges with Bank of America's more conservative banking culture.  Now competitors out there are paying 150% -200% of Merrill Lynch brokers' trailing twelve.  That's enticing and it ought to continue.

Attorneys at SNSFE assist brokers in transitioning from firm-to-firm and in negotiating these precise legal terms and protections of the employment agreement and the promissory note.

Source:  Wall Street Journal Reports

Investor Protection Priorities Of Securities Regulators Revealed In Continuing Education Topics

The Securities Industry/Regulatory Council on Continuing Education (the “CE Council”) recently published its Firm Element Advisory to “highlight current regulatory and sales practice issues” for financial services firms to consider incorporating into their continuing education programs for financial advisers.  All in all, the CE Council has identified 14 areas for study, and its website (www.cecouncil.com) contains helpful web links and references to fully explore those areas.  Let’s examine the more critical ones for investors to know.  

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SEC Sanctions Against Brokerage Firm CEO Underscores Requirement To Supervise Reasonably

Recently the SEC (Securities and Exchange Commission) instituted settled administrative proceedings against Stephen Moynahan (SEC Rel.No. 34-58689).  Moynahan was the former president and CEO of Dolphin & Bradbury, Incorporated, formerly a registered broker-dealer.  The SEC finds that Moynahan failed reasonably to supervise a fraudulent scheme perpetrated by Robert Bradbury, an investment banker and co-owner of the firm.  Without admitting or denying the findings, Moynahan consented to the entry of an order which bars him from supervising, bars him from owning another firm, suspends him for six months and fines him $140,000.  Importantly, the SEC imposes those substantial sanctions despite recognizing that Moynahan had "no knowledge" of Bradbury's fraudulent scheme.  Let's examine why.

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