Wall Street brokers being lured with 100-per cent earnings as commisions

27 October 2008

Fed up of having to explain the catastrophic economic meltdown and credit squeeze, emergency capital infusions, losses, fire sales, near bankruptcy, write-downs, and layoffs that they had nothing to do with to their stunned clients, brokers on Wall Street are leaving big name employers like Wachovia, Merrill Lynch, UBS and joining companies that offer better pay packages or are starting-off on their own.

Although many major US banks and financial institutions failed and were forced to merge due to their exposure to the subprime mortgage market, the wealth management divisions of these institutions did exceedingly well which was in the case of Lehman Brothers who filed for bankruptcy and Merrill Lynch, which was acquired by Bank of America for an all-stock deal worth $50 billion.

In fact, Merrill Lynch's main attraction for Bank of America was its global wealth management division whose nearly 17,000 brokers control nearly $1.5 trillion in client assets and the division has outperformed Merrill's investment banking and money-losing trading businesses this year. The same consideration is said to have prevailed in Wells Fargo's $15-billion deal to buy Wachovia, which includes its AG Edwards brokerage business.

Chief executive of Bank of America, Kenneth Lewis, has commented that the brokers of Merrill Lynch were the ''crown jewels'' of the company, after the merger of Merrill Lynch with Bank of America.

Citigroup's wealth management arm, Smith Barney has lost 500 brokers in the past six months and 10 big brokers who collectively controlled $5 billion of client money, left the firm and went independent.

Merrill Lynch, which has seen a steady stream of brokers leaving, saw four of its top brokers who had been with it since the late 1990's and managed $1 billion, leave last week to set up shop on their own.