- The bonuses can reach $15million for some teams over the course of years
- The bidding war has reached its highest level since the financial crisis hit the U.S.
- Brokers are offered two to three times the commissions and feed they made in the previous year
Bonuses offered by the U.S.’s biggest securities companies to recruit top brokers are reaching their loftiest levels since the financial crisis, and none of the big firms are retreating from the bidding war.
The brokerage arms of banks such as Morgan Stanley, UBS AG, Wells Fargo & Co. and Bank of America are offering high-end U.S. brokers two to three times the commissions and fees they produced in the previous year, up from about one times those earnings previously.
The bonuses, which can approach $15million for some teams over several years, have steadily escalated and include perks such as prime parking spaces and the hiring of brokers’ sales assistants, recruiters say.
The bonuses reflect how eager big firms are to manage the assets of the very wealthy, who tend to be more loyal to their advisers than to the advisers’ firms.
In addition, fees from wealth management, as the brokerage business is known today, are dependable, while revenue streams from trading and investing are volatile and becoming less profitable under regulatory and market pressures.
The big companies also are eager to attract big brokers and assets at a time when investors are still fearful of investing and cutting down on trades. So despite the costs, big firms keep bidding up the pay.
‘Clearly they want the deals to go away, but no one can afford to make the first move and lose market share,’ said Alois Pirker, research director of Aite Group, a wealth management consulting firm in Boston.
The high payouts mean brokerages often won’t recoup their largesse for at least two years, and often more than five, according to brokerage executives who declined to be identified.
And if brokers who are sated on fat bonuses or uncomfortable with their new firm lose their sales zeal, the payback can extend years beyond that.
‘They should absolutely stop doing it, but nobody wants to give up their competitive advantage,’ said Pirker. ‘If they go cold turkey, they lose.’
Just two years ago, brokerage executives said they understood the folly and were going to end it.