Exclusive: Merrill strips interns of their client books
September 30, 2021
Merrill Lynch Wealth Management has cut around 200 potential advisers from their clients in the latest in a series of dramatic changes to its broker education program.
Details of the policy change were presented to local leaders of the Advisor Development Program in a letter earlier this month from Eric Schimpf, co-head of Merrill advisor training, and Susan Axelrod, director of supervision of the company. The company gave managers until September 16 to withdraw clients, which were sent to a pool for distribution to established Merrill brokers, according to the letter.
A spokesperson for Merrill confirmed the new policy and said it would affect around 200 of the roughly 1,000 newbie brokers who transferred to banking positions this summer as part of a major overhaul of the training program. He declined to quantify the number of assets subject to the change.
âThis decision was based on the level of sophistication of client needs and the type of solutions that early stage advisors are allowed to offer under the program,â the spokesperson added.
The change was troubling for interns who had sown their fledgling books, in some cases, with close friends and family, according to two would-be brokers who spoke on condition of anonymity. Outsiders read it as yet another defeat of the historic model of eating what you kill for bookbuilding and further cements the banking pedigree for the next generation at Merrill.
âIt is very difficult to create the prototype advisor from scratch these days, a problem that is not unique to Merrill Lynch,â said Danny Sarch, an industry recruiter in White Plains, New York. “They are clearly moving towards a more banking model and you see it every day with what they do.”
Merrill in May disbanded its Financial Advisor Development Program – one of the industry’s largest and longest-standing brokerage development programs – and said it would attract its next generation of advisors into banking roles. About 1,000 of its 3,000 trainees went on to become Banking Financial Solutions Advisors, while the other 2,000 who were further away with their training were allowed to complete the program and were unaffected by the client’s withdrawal.
At the same time, he banned cold calls to prospect clients and said he would find new clients from Bank of America’s pool of retail clients with more than $ 1 million in their bank accounts.
The interns, who said they were reassured by senior managers that they would be able to keep their books, were told of the client’s withdrawal by local leaders from their markets. The company would compensate them for deleted customers with a one-time payment, “based on the previous compensation plan and the activity associated with those relationships,” the Merrill spokesperson said.
But both interns said the pay was minimal and Merrill’s methods used to calculate the payouts were far from transparent. Payments ranged from as low as $ 200 for a list with less than $ 3 million in customer assets and up to $ 20,000 for a list with less than $ 40 million in customer assets, according to the ‘one of the trainees.
âI said, ‘I didn’t agree with any of this and I don’t agree with that,â said one intern. âBut they’ve already taken clients. The damage is done.”
The letter from Axelrod – a former Financial Industry Regulatory Authority executive who joined Merrill in 2018 – and Schimpf clarified that a Finra rule requiring clients to be notified when their advisers leave a company no was not applicable. The firm would therefore not systematically or automatically inform the clients of trainees that they are no longer clients of aspiring brokers.
The Merrill spokesperson said clients will however be contacted by the intern who was advising them “to ensure a positive experience” and “to educate them about the relationship change.”
If clients, after being advised on Merrill’s various wealth management options, said they wished to continue with the intern, they would have the option of returning to the intern at the end of a ‘discovery’ process, said the spokesperson without specifying the procedure.
The revisions to the training program came after Merrill’s training hit a slowdown in July 2020, when the communications company halted prospecting and performance targets after discovering do not have phone number violations by newbie brokers. – a development which sources say triggered a review by Finra.
In May, during the unveiling of the new training program, Merrill Wealth President Andy Sieg said the company expects it will eventually be able to train around 1,000 new brokers per year with a success rate of d ‘about 80%, about 20% historically. Bank employees who joined the Merrill training program generally have higher retention than other newcomers and are more diverse, executives said.
Bank of America’s Global Wealth and Investment Management division, which includes Merrill Lynch as well as Bank of America Private Bank and several thousand Merrill Edge brokers, had an advisory workforce of 19,385 at the end of the second quarter, down 5.9% year over year.