SIGNING BONUSES

Mindy Diamond: The deals are tremendous, and the key component of those increased deals is addressing issues of investments per account. That has been the single biggest deterrent to brokers moving, those golden handcuffs, and for the first time now the firms are addressing that issue--making it possible for the guy who said five years ago, "When the deals get to 200%, call me." They're just about there.

Bill Willis: Performance by brokers is better than it has been in a long time, and therefore they're more encouraged to look at deals knowing that more clients would come with them. I think that's a big factor. Furthermore, there is pent-up demand, but movement in the last two or three years has been quite slow for top producers. Now there are the new, increased deals, with the pressure on managers to recruit.

Carrie Degenhardt-Burke: I've actually never seen so much pressure on the branch managers throughout the United States as I've seen this year. On the average, in every major city, I would say the key managers are responsible for hiring up to 10 people, two of them possibly being trainees.

Diamond: Branch managers have the most aggressive goals that they've ever had. But we're talking about hiring the creme de la creme, the broker that is doing over $400,000 in production, more than 40% fee-based, clean U-4. Whereas before, the $200,000 broker could have gotten a deal. The deals are aggressive, and the hiring is aggressive, but it's for the right kind of candidate.

WHO THEY'RE LOOKING FOR

Paul Warehall: I was told by managers from two different high-end firms that they're totally frustrated with the recruitment of MBAs and attorneys, and with the results they're getting from these individuals. Yes, a star broker comes out of that process on occasion, but I

liken it to minor-league sports. It's a lot of activity, without the outcome they want. When they recruit someone [who's already been a broker], they have a higher expectation or probability of future firm revenues.

PAYOUT DIFFERENCES

Andy Tasnady: I see more segmentation happening by firms on the types of brokers they're trying to attract. But if I'm a financial adviser--particularly if I'm a target financial adviser--I'd be more selective about which firm I joined and really spend time looking at the compensation plan. Because depending on your mix of business, even though account plans might look similar, they might actually perform very differently for you as an individual. If you discount tickets a lot and have small clients, some firms will really penalize you for that. If you have large tickets and large clients, you might have a premium. If you're asset-based and more advisory, there are some firms that are paying a lot more than others. So you really have to look at the details.

CONSOLIDATION

Rich Schwarzkopf: I was looking at the headcounts of brokerage firms over the last five years, and only one firm is ahead of 2000, which is kind of amazing. Merrill Lynch is down 25% from its year-2000 headcount. The only firm that's up is Edward Jones--that's a different kind of business, but the normal, traditional wirehouse or major regional firm is down. Compared to year-end 2000, we're net negative.

COMPLEXITY OF GRIDS

Willis: Some of these payout programs are so complex, because their plans have been altered year after year. If you've lived there for 10 years, you sort of understand it. But if you're the new guy coming in, they're a nightmare. You have to look at a few paychecks and production runs to fully understand it. That's why I like Wachovia's new system. It's a breath of fresh air--so incredibly simple that you can understand it after five minutes of reading the brochure.

Diamond: A lot of brokers complain that even if you've been at a firm for 10 years, they don't know what their payout is, because they're getting paid different amounts on different products that they're selling. They can't even tell you what their average payout is, because it's so different--all over the map. Wachovia came in and said, "Not only are we going to simplify the payout, but we're going to be the best payout on the Street, and it's a monthly payout grid." For the first $9,000 a month, the broker gets paid 20%, and then for the rest of it, it's 50%, no matter what kind of product you're selling. So on average, a broker's getting probably mid-40s, and it's obviously a better payout for a larger producer.

Degenhardt-Burke: I was speaking with a friend of mine over at Bear Stearns a couple days ago, and I asked, "Could I take a look at your grid? I want to see what exactly the grid is at Bear Stearns." He basically said, "Carrie, I've never even seen a grid here. I don't know how I get paid. I just get a paycheck." That would drive me nuts.