Creative Giving
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On Wall Street, top players just don't get wages, salaries, fees, commissions or bonuses. They get packages.
Over the past year, top brokers who have switched houses on the Street have gotten some very creative ones, and for good reason. They are getting big bucks putting up big revenue numbers where they are and they need to be lured with something special to get them to move, like ways of being paid for any deferred compensation they might be giving up. The better the broker the more bells and whistles — like loans and designer offices — they are offered.
The brokers getting the most creative and lucrative packages have a number of characteristics in common. They're generally multimillion-dollar producers, though lesser producers may also get packages, albeit smaller, less intricate ones. They've also made relatively few moves, have a return on assets (ROA) of approximately one, have clean compliance records and hold a significant percentage of their books in fee-based assets.
Where brokers at banks and other off-Wall Street sites may have once been seen as second-class citizens, they are getting the same packages as those being offered to brokers from the elite Street firms — if they have a wealthy client base that managers are confident will move with them.
Take for example, a two-broker team that recently moved to a major wirehouse from a national bank. They have more than $2.5 million in production, $300 million in combined assets and 40 percent of their book in fee-based assets.
By any standard, their deal is remarkable. The team will receive 110 percent of their combined trailing 12-months production upfront in cash, structured as a seven-year nonforgivable loan, on top of that, they received 20 percent of their combined trailing 12-months production in stock on a seven-year cliff vest. Further, they will be granted a 25 percent back-end bonus in stock. It will be paid after the 14th month with the new firm and contingent upon 75 percent of their assets at time of recruitment moving to the new firm.
They have also negotiated an additional 20 percent of trailing 12-months production bonus, to be paid at the end of their 26th month. It is contingent upon 85 percent of the assets at time of recruitment being moved to the new firm. The total package will equal 175 percent of their trailing 12-months production at time of recruitment if they meet client-retention goals‥
In another instance, a broker who valued high-end space was able to negotiate a first-class office and an interior designer to choose furnishings. Another broker needed two sales assistants to support his growing business; his new firm was willing to pay for both. A broker who felt he needed to wine and dine wealthy clients around the country was able to negotiate a significant travel-and-expense allowance so that the new firm would pay for his personal meetings with them.
Top brokers are even finding the keys to golden handcuffs or deferred compensation. That was the case last year with a $1 million wirehouse producer from California. In more than 20 years at one firm, he had built a pair of glittering bracelets worth seven figures that he wouldn't leave behind. That was until another wirehouse gave him a package that reimbursed him on the unvested portion of his deferred-comp plan through handsome front- and back-end bonuses.
Clearly, this is a seller's market for top brokers. Wall Street is a highly competitive playing field offering the best producers many viable opportunities at wirehouses, regional firms, boutiques, banks and independents. This competition has driven firms to offer previously unheard of transition packages with no end in sight. Brokers who may fit the bill — or even come close — should keep their eyes open. Who knows? You may be next.
Writer's BIO: Mindy Diamond founded Chester, N.J.-based Diamond Consultants, which specializes in retail brokerage and banking recruiting www.diamondrecruiter.com
