Some advisors at Bank of America Merrill Lynch's U.S. Trust unit this week received an ultimatum from on high, demanding they sign a new agreement that would effectively sideline them for up to eight months if and when they decide to leave the firm or else risk losing not only their 2010 bonuses but their jobs, too.
According to sources quoted in a Bloomberg report, agreeing to the "garden leave" stipulation -- which bumps the current two-week notice policy to 60 days and adds an additional six months to the non-solicit ban -- would result in reduced pay and the new caveat that advisors who opt to resign can be reassigned to "whatever duties" the firm decides during the initial two months of leave.
The document, according a spokesperson for BofA's U.S. Trust unit, merely extended the unit's existing human resources policy to now include advisors along with the rest of unit's employees The spokesperson would not say how many -- or if all -- of the U.S. Trust advisors were presented with the revised policy, adding that whether advisors sign or don't sign the document, they will all still be held to U.S. Trust's existing policy at the time of their departure.
"Essentially, it's an HR policy that was streamlined and expanded to include advisors at U.S. Trust," the spokesperson said. "The policy itself is more around supporting the team-based model of client service that we've always had at U.S. Trust," and said the timing of the advisement was consistent with previous HR directives that were typically circulated in January and February in past years.
"There's been a pretty vigorous industry standard around this for some time," the spokesperson said. "We're the news today but many others are [implementing similar policies] as well. We've been on a very aggressive hiring campaign recently and we've seen a lot of these same restrictions."
But some financial advisors, recruiting executives and analysts, the move reeks of desperation and overreaction in the wake of several high-profile defections from BofA's ranks -- most notably one-time rainmaker Michael C. Brown who bolted last year for Dynasty Financial Partners -- and illustrates the profound cultural differences between acquiring banks and the investment firms they've acquired.
"This really doesn't surprise me," said Gary Goldstein, president of financial services executive search firm Whitney Group. "Firms are doing more of these to hold onto their staff because it makes them difficult [for competitors] to hire."
"But six months or eight months or whatever it is, that’s pretty onerous," he added. "But these banks aren't about creating culture. They make it very clear that [advisors] are expendable. The seat is what has value. All [advisors] have to do is distribute the products."
The fact that Sallie Krawcheck, president of BofA's global wealth and investment management unit, appears to be in lockstep with the new, "expanded" HR protocol surprises some financial services pundits considering her long and distinguished career on the investment and wealth management side of the business.
And it could easily backfire on BofA if the goal is attract and retain top-flight advisors and grow its revenue and assets under management.
"I recognize that Sallie is reacting to having lost an important group of financial advisors," said Geoffrey Bobroff, president of mutual fund consulting and advisory firm Bobroff Consulting. "But holding people hostage and depriving them the right to gainful employment not only tends to not hold up in court, but it doesn't ring right in the traditional parlances of the advisor world."
Bobroff said the ultimatum will most likely be counterproductive, not only in terms of recruiting new talent that will survey the landscape to find firms that don't demand garden leave term, but also among the remaining advisors who sign off on the new terms.
"It puts people in an awkward setting," he said. "You want to build an organization that's vibrant and entrepreneurial. It's another example of how banks really don't understand the brokerage business or advisors. It doesn't build goodwill within the ranks of the organization."
Another condition of what BofA's U.S. Trust unit characterized as the extension of existing HR policies to advisors calls for advisors to agree that they will no longer be subject to the prevailing broker protocol, essentially a voluntary recruiting agreement that allows departing advisors to solicit clients without facing litigation from their former employers.
By making this stipulation, Mindy Diamond, president and CEO of financial services recruiting firm Diamond Consultants, said BofA's U.S. Trust unit risks losing some of its top-performing advisors and could find it extremely difficult to lure away superstars from other firms as the available talent pool continues to contract.
"Advisors very definitely make employment decisions based on whether or not they'll be part of the broker protocol," she said. "[The new policy] is not keeping with the rest of the industry, except for maybe partners at Goldman Sachs or other top-level executives."
"Bonus time is the time when advisors are most active about exploring and examining their options," she added. "It stinks to forego a bonus but I suspect many of these advisors will either band together and refuse to sign it or leave before they're put on the beach for eight months when they finally do move on."