Exclusive: Merrill withdraws trainees from their customer books

September 30, 2021

Merrill Lynch Wealth Management has withdrawn around 200 prospective advisors from its clients as part of a series of dramatic changes to its broker training program.

The details of the policy change were detailed earlier this month in a letter from Eric Schimpf, co-director of consultant training at Merrill, and Susan Axelrod, the company’s chief supervisory officer, to local managers of the Advisor Development Program. The firm gave the managers until September 16, according to the letter, to remove the customers who were pooled for distribution to established Merrill brokers.

A Merrill spokesperson confirmed the new policy, saying it would affect around 200 of the 1,000 or so neophyte brokers who were transferred to bank roles this summer as part of a major overhaul of the training program. He declined to quantify how many assets were affected by the change.

“This decision was based on the sophistication of clients’ needs and the type of proposed solutions that consultants are allowed to offer as part of the program at the beginning of their development,” added the spokesman.

The change was worrying for apprentices who, in some instances, had seeded their young books with close friends and family members, according to two would-be brokers who spoke on condition of anonymity. Outsiders read it as yet another downfall of the historic eat-what-you-kill model of building a book and one that will further cement the bank trunk for the next generation at Merrill.

“It’s very difficult these days to create a prototype consultant from scratch, an issue that isn’t unique to Merrill Lynch,” said Danny Sarch, an industry recruiter in White Plains, New York. “They are clearly moving more towards a banking model and you see that every day in what they do.”

In May, Merrill closed its Financial Advisor Development Program – one of the largest and longest-running broker development curricula in the industry – and announced that it is moving its next generation of advisors out of banking roles. Approximately 1,000 of the 3,000 trainees became financial solutions banking advisors, while the other 2,000 who were still in their training were allowed to complete the program and were not affected by the removal of the client.

At the same time, it banned cold calling for customers and announced that it would attract new customers from Bank of America’s pool of private customers with over $ 1 million in their bank accounts.

The trainees, who said they had been assured by senior executives that they could keep their books, were informed of the removal from customers by local guides in their markets. The company will compensate them for distant customers with a one-off payment “based on the previous compensation plan and activities related to those relationships,” the Merrill spokesman said.

However, the two trainees said that compensation was minimal and Merrill’s methods of calculating payments were far from transparent. Payments ranged from just $ 200 for a list of client assets less than $ 3 million and up to $ 20,000 for a list with less than $ 40 million client assets, according to one of the trainees.

“I said, ‘I don’t agree with all of this and I don’t agree with it,’” said one trainee. “But the customers have already taken them with them. The damage is done. “

The letter from Axelrod – a former senior executive of the Financial Industry Regulatory Authority who joined Merrill in 2018 – and Schimpf made it clear that a Finra rule that requires customers to be notified when their advisors leave a company does not apply . The law firm would therefore not systematically or automatically inform the trainees’ customers that they are no longer customers of the prospective brokers.

However, the Merrill spokesman said customers will be contacted by the trainee who advised them “to ensure a positive experience” and “to alert them to the relationship change.”

If clients, after consulting Merrill’s various wealth management options, said they wanted to continue with the trainee, they would have the option of returning to the trainee at the end of a “discovery” process, the spokesman said without further elaboration enter into proceedings.

The training program revisions came after Merrill’s training hit a speed bump in July 2020 when the wirehouse stopped prospecting and performance targets after discovering violations from neophyte brokers who don’t call – a development sources say Finra has reviewed triggered.

At the launch of the new training program in May, Andy Sieg, President of Merrill Wealth, said the company expects it could ultimately train around 1,000 new brokers per year with a success rate of around 80%, historically around 20% . Bank employees who have joined the Merrill training program tend to have higher retention than other newcomers and are more diverse, executives said.

The number of advisors in 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, was 19,385 at the end of the second quarter, a decrease of 5.9% compared to the previous year.

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