Bank of America Corp. is offering Merrill Lynch & Co. brokers in the U.S. bonuses of as much as 100 percent of the annual revenue they bring in, to keep them from defecting after the firms merge, people briefed on the plan said.
Brokers who generate at least $1 million of fees and commissions are eligible to receive the full amount over seven years, according to the people, who declined to be identified because the incentives haven't been disclosed. The Charlotte-based bank is offering smaller bonuses to Merrill brokers who produce at least $500,000 and rolling out a separate retention program for its own brokerage force.
Bank of America Chief Executive Officer Ken Lewis is trying to prevent attrition in Merrill's brokerage ranks after agreeing last month to buy the New York-based securities firm in an all-stock deal valued then at $50 billion. The 16,850-broker unit has outperformed Merrill's investment-banking and money-losing trading businesses this year and Lewis, 61, has called the brokerage the “crown jewel” of Merrill's franchise.
Retention awards will help ensure “that the full long-term value of this combination is realized,” Robert McCann, chief of Merrill's brokerage division, said in a statement. “It is important for clients, shareholders and the future of the combined company to retain top-performing advisers.”
McCann, 50, was named earlier this week to head the combined firms' brokerage units following the takeover.
“Merrill brokers are getting pummeled with recruiting calls, even more than usual,” said Biff Robillard, who left Merrill in May after 24 years to start his own investment advisory firm, Bannerstone Capital Management LLC in Deephaven, Minn. “Merrill has to say, ‘Here's a retention package to compete against the opportunity to go across the street or go independent.'”
Bank of America, the largest U.S. consumer bank, will pay Merrill brokers who produce $750,000 to $1 million of revenue as much as 75 percent of that amount, according to the people with knowledge of the plan. Brokers who generate $500,000 to $750,000 may get 50 percent.
The bonus program applies to Merrill's 15,500 brokers in the U.S., about half of whom are likely to qualify for some award, the people familiar with the incentives said. Separate plans are being offered to brokers in Asia, Europe and the Middle East, they said.
Bank of America's 1,964 brokers, who will be folded into the Merrill network, may be eligible for deferred cash awards, payable over three years, of as much as 50 percent if they generate more than $2 million of annual revenue, the people familiar with the plan said.
Bank of America plans to keep the Merrill Lynch brand name for brokers after the deal is completed, so executives at the firms are characterizing the bonuses as transition awards, the person said. The bonus programs were announced internally at the companies Friday, according to the people.