Published: Tuesday, 21 Feb 2012 | 8:18 PM ET Bank of America's Merrill Lynch has launched a more aggressive recruiting campaign for top-tier brokers, including a bonus paid for transferring client assets after six months at the firm, two sources familiar with the new plan said Tuesday.
Merrill Lynch [BAC Loading... ()
] last week told managers that it was offering brokers from
UBS,
Morgan Stanley Smith Barney,
Wells Fargo and other firms an upfront cash payment equal to 150 percent of the fees and commissions they generated during the prior 12 months. The offer is limited to advisers whose performance put them in the top 40 percent of their peers, the two sources said.
Merrill previously offered brokers 140 percent up front, according to one recruiter who was briefed on the changes. The higher offer lets Merrill catch up with bonuses offered at rivals UBS and Morgan Stanley, the recruiter said, in a market environment where it difficult to generate growth organically.
More significantly, Merrill also will pay an additional 25 percent bonus after six months if brokers transfer 65 percent of the assets they oversaw at their former employer. These brokers also can receive a 50 percent bonus — half cash, half stock — after the first year of the deal if they attract 75 percent of their client assets.
These payments combined mean some brokers can take home two times their trailing-year revenue in cash after just one year, one of the most aggressive packages offered by Merrill, a veteran recruiter said.
The offer is part of a nine-year commitment, which lets brokers earn additional "back end" payments based on meeting revenue and asset-growth goals.
A Bank of America spokeswoman said the company does not comment on its compensation practices, but noted the firm continues to focus on hiring and training. "We have and continue to be a competitive but highly selective recruiter of top industry talent," she said.
Merrill, the No. 2 U.S. brokerage with about 17,300 financial advisers, has suffered some defections in recent weeks as rivals like UBS increased their up-front bonuses to 180 percent of trailing twelve-month revenue — for those who signed by the end of last year. That was up from about 130 to 140 percent in previous months.
UBS last month announced it had hired at least 14 veteran Merrill brokers who in total managed more than $2 billion in client assets.
The competition for the relatively few top advisers, not already tied down by previous recruiting and retention packages, has been heating up in recent months, recruiters said. UBS for example was offering 210 percent deals with an eye toward luring Merrill brokers.
One recruiter said the new Merrill program, offered even as the bank parent scrambles to slash spending and repair a battered balance sheet, shows the firm is showing renewed signs of confidence.Copyright 2012 Thomson Reuters. Click for restrictions.
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Facebook plans to increase its $2.5 billion credit line to help cover a major tax hit when employee stock awards vest shortly after it goes public, according to two sources familiar with the company's plans. The world's largest social media network, which boosted its borrowing capacity by two-thirds just six months ago, is taking advantage of its strong position to get more financing for its phenomenal growth, the sources said. The sources spoke on condition of anonymity because they are not authorized to speak publicly about such plans. A spokesman for Facebook declined to comment. "All these tax obligations are being created and you need cash to take care of it. You see this all the time but in this case it will be substantial," said Michael Moe of GSV Capital, which owns Facebook shares. "Having the cash to be able to take care of that makes a lot of sense. That would be the motivator of a larger credit facility." Facebook has said it plans to pay taxes on its employees' restricted stock units, or RSUs, when they vest six months after the company's initial public offering. The exact amount is likely to total billions of dollars, based on Facebook's stock price at the time. Helping employees cover tax on RSUs is relatively unusual and leaves the employer with a "very expensive obligation" that could increase if Facebook shares climb, said Bart Greenberg, a partner at law firm Haynes and Boone who advises start-up tech companies. "It could create such a large cash obligation that it eats up most of the credit facility," Greenberg added. "That facility may have been originally set aside for acquisition opportunities or working capital." Facebook said it may sell equity securities, tap its credit facility, use cash or a combination of these options to meet its tax obligation, according to its IPO filing. In February 2011, Facebook set up a $1.5 billion credit agreement with affiliates of Morgan Stanley, JPMorgan, Goldman Sachs, Bank of America's Merrill Lynch and Barclays Capital, the leading underwriters of the company's IPO. In September 2011, the borrowing capacity was increased $2.5 billion. "The golden rule of finance is that you get the money when you can, not when you need it," said Moe, who co-founded investment bank ThinkEquity. "Creating maximum flexibility will allow you to be efficient with your use of capital but also opportunistic when appropriate." Some other tech companies that recently went public have also arranged similar credit facilities. Zynga [ZNGA Loading... () 
] , the social games giant, set up a $1 billion facility with some underwriters of its IPO, which happened late last year. Facebook and Zynga generate substantial profits, but the companies have big credit facilities because it is good corporate finance strategy to line up back-up cash from a position of strength, Moe and others said. The months leading up to an IPO are a good time for companies to arrange credit facilities because they have the most negotiating power with banks vying for lucrative roles in equity offerings, according to the chief financial officer of a large private tech company who asked not to be identified.Copyright 2012 Thomson Reuters. Click for restrictions.
Facebook plans to increase its $2.5 billion credit line to help cover a major tax hit when employee stock awards vest shortly after it goes public, according to two sources familiar with the company's plans. The world's largest social media network, which boosted its borrowing capacity by two-thirds just six months ago, is taking advantage of its strong position to get more financing for its phenomenal growth, the sources said. The sources spoke on condition of anonymity because they are not authorized to speak publicly about such plans. A spokesman for Facebook declined to comment. "All these tax obligations are being created and you need cash to take care of it. You see this all the time but in this case it will be substantial," said Michael Moe of GSV Capital, which owns Facebook shares. "Having the cash to be able to take care of that makes a lot of sense. That would be the motivator of a larger credit facility." Facebook has said it plans to pay taxes on its employees' restricted stock units, or RSUs, when they vest six months after the company's initial public offering. The exact amount is likely to total billions of dollars, based on Facebook's stock price at the time. Helping employees cover tax on RSUs is relatively unusual and leaves the employer with a "very expensive obligation" that could increase if Facebook shares climb, said Bart Greenberg, a partner at law firm Haynes and Boone who advises start-up tech companies. "It could create such a large cash obligation that it eats up most of the credit facility," Greenberg added. "That facility may have been originally set aside for acquisition opportunities or working capital." Facebook said it may sell equity securities, tap its credit facility, use cash or a combination of these options to meet its tax obligation, according to its IPO filing. In February 2011, Facebook set up a $1.5 billion credit agreement with affiliates of Morgan Stanley, JPMorgan, Goldman Sachs, Bank of America's Merrill Lynch and Barclays Capital, the leading underwriters of the company's IPO. In September 2011, the borrowing capacity was increased $2.5 billion. "The golden rule of finance is that you get the money when you can, not when you need it," said Moe, who co-founded investment bank ThinkEquity. "Creating maximum flexibility will allow you to be efficient with your use of capital but also opportunistic when appropriate." Some other tech companies that recently went public have also arranged similar credit facilities. Zynga [ZNGA Loading... ()