- According to a report on Reuters, Merrill Lynch, owned by Bank of America, will cease the practice of paying out hundreds of thousands of dollars in upfront recruitment bonuses to Wall Street brokerages. This action will take place in June 2017, not impacting recruitment contracts currently in place.
- The practice has been criticized for years because it does not always result in a good hire and brokers often walk away with large sums of money, making recruitment overly focused on bonuses. Last year, Merrill Lynch stopped handing out retention bonuses, saving them $400 million in non-interest expenses.
- Reportedly, a pilot program will be launched in Chicago to recruit early career advisors and they will be offered a three-year salary match and payouts based on performance and production.
Companies like Merrill Lynch, UBS Group, Morgan Stanley, and others have long used up-front broker bonuses to reel in the best Wall Street candidates. However, over the years, this practice has increasingly failed to produce the kind of investment return that is needed to be profitable.
Much of this has to do with the increasing pressure on financial firms to be more transparent when it comes to how and when money is spent. Consumers, who invest in big banks, are increasingly demanding to know how their money is being used. On top of this, brokers are aggressively seeking to advance in their careers, particularly those from the millennial generation who are willing to jump to another company if their needs aren't being met.
More companies are leaning into sustainable recruitment practices (including investing in flexible benefits programs) to save money and retain talent.