Oh to the yeah, people. You might not be getting a bonus for a job done this year, but Bloomberg reports that Bank of America is offering Merrill brokers sort of a sweet deal if they promise not to leave (ever). Brokers who generate over $1 million will receive one hundred percent of the revenue brought in, though it’ll be paid out over seven years. Those producing $500k-1million will receive “smaller” goodie bags.
Bonus Watch ’08: Bank of America Offers Merrill Brokers Big Bonuses, Strings Obviously Attached
By Bess LevinComments (19)
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Citadel call is full. Can’t get through. Bess, can you use the Bat Phone?
hey spode and cluzo. Do you two do the elephant walk with each other,while watching the biggest loser on TiVo. BULLY’S
This is quite standard, same deal when Wachovia bought A.G. Edwards.
Keep in mind that the brokers typically only net 40% or so of their gross production. The firms pocket the rest. Big producers are a very lucrative to their firms.
This is slavery. Dimon practiced something like this at BankOne and then at Morgan.
There’s always forfit money on the table. It’s not as sweet a setup as it sounds.
@ 5:
If a million dollar bonus for keeping my ass in a chair for seven years is slavery, call me Kunta Kinte.
MER might have sucked but BAC was the black hole of suckdom.
Derk Maugham tried this at Salomon brothers back in the 90′s with the Equity Derivatives salespeople. Didn’t work then. Maybe it’ll work now.
Derek didn’t want brokers setting up unprofitable long term deals, cashing out, and leaving the bank eating the residual loss. If Merrill checks the long term P&L before writing the yearly “percentage” check this could be ugly.
My other 50 beeps are on the way. And you bitches laughed when I said 100 a few weeks ago. Cut it zero, won’t make a difference now, monetary policy can’t be the only tool and with fiscal having a 6 month lag, at the minimum, double digit unemployment. Yea bitches!
SPODE
Spode, we’re two quick farts away from negative forward interest rates. Time to start googling “liquidity trap”.
That’s why I said it won’t make a difference. Relying on monetary at the expense of fiscal does not create a balance. Then I eluded to fiscals achilles heal, time lag of 6 months at best. Its strength is tremendous but its usefulness is rendered almost useless courtesy of Washington and its “no special interest group left behind” mentality and slow implementation, proven earlier this month. I have and continue to view the recent lowering of rates as more of a symbolic move and not one of substance. Main street thinks we need lower rates so give them what they want. When the ducks start quaking feed them so they shut up.
Quack quack bitches.
For the benefit of the yokels visiting from yahoo finance let me explain how structured products sales functions:
The salesperson generates a trade (option, CDS, vol swap, etc…) which brings cash into the firm which salesperson racks up as a sales credit.
A trader is responsible for hedging the risk of sold item, adds it to his/her book of previously sold products.
At the end of the year the salesperson adds up their sales credits and lobbies for a bonus.
If the salesperson sold below hedging cost the trader loses money but everyone still gets paid.
I’m guessing there’s some fine print in the new Merrill model about tracking the realized value of the sale in terms of how much actual value it created over its lifetime (usually 5-7 years) as opposed to just realizing the full value on the sale date and assuming a hedging cost which may or may not be valid.
So go ahead and sell $1MM of product. See what your take home is gonna be.
@12 Better cite your source.. let us call it Google Finance
After you cite, grab Stan O’neal his Wilson Staff 8 iron, he’s about 150 yards out.
Ummm, #12, I think this article is about Merrill’s retail sales people, not structured products. I don’t think Merrill has (or ever had) 15,000 structured product salesmen.
Retail salesmen book their commissions immediately and don’t need to do any customer hedging.
I still don’t understand why people pay Merrill brokers $500 to do something they could have done themselves for $5 (or less if they’re big enough for a REDI account), but I guess some people don’t mind handing over money so long as they get to talk to “a Wall Street hotshot.”
@14 Most of the money is in managed accounts with firms like NWQ, TCW, Davis, etc. The broker acts as the intermediary for a 1 percent or so fee. When managed accounts first came out it was up to 2.5 percent the broker could charge, early mid 90′s. There aren’t a lot of stock jokey brokers anymore and if there are they probably aren’t at MER or MS. MER has some of the most profitable brokers on the street as MS frequently followed their lead.
Retail Broker Bob
100 million under management and 70 percent of that is in managed money at 1 percent on average grosses 700k at a 40 percent payout he takes home 280′ish. Assume the other 30 million is distributed as follows: 10 million in mutual funds paying 25 beeps a year, 100 beeps if C shares, 15 million individual securities -stocks and bond- with some movement maybe 1 percent, and the remaining 10 million in misc products like insurance.
350K take home on 100 million or so. 30 percent hit in the market and now he’s making 245K or so.
The dreaded “vested” but drawn out beyond the normal 5 year limit?
“Merrill Lynch” will soon be “E-Trade” with brokers. $7.95 for a DIY trade, or $500 to talk to yuppie in a suit.
These two corporate cultures, the Mass-Market BofA and the elitist jet-pilot in a suit sales shtick of Merrill Lynch are SO diametrically opposed that either Merrill eventually finds a way to go private or it will find its brand eroded more and more each passing year.
Gimme Charles Schwab any day.
So how about the people making less than $500K?
http://www.weeklyta.blogspot.com
they get candy bags for Halloween
Under 500k you receive a commemorative 2007 Stan O’Neal Charitable Golf Outing bag tag.