Big recruiting deals in AdviserLand: What’s going on?

Monday’s Wall Street Journal had an article about B of A/Merrill Lynch increasing their deals for recruits at the high end for 150%, up from 120%. At the same time, Morgan Stanley Smith Barney reportedly is offering big deals for third and fourth quintile Advisors. One Merrill Advisor told me that he got called from five separate headhunters pitching him on MSSB over the course of the last week. Their “presentation” was: “Let me ask you a question. Can you use 300% right now?”
What is happening in AdvisorLand right now which would explain this level of aggressiveness?
Recruiting has slowed from the frantic days of 2009. Yet a big brokerage firm’s attrition, from retirement, terminations for compliance or HR reasons, Advisors leaving the business, as well as departures for the competition, remains constant. The Biggest Firms are anxious to keep their Advisor numbers high; their net new asset numbers high. They also are very competitive with each other. They want to be able to create a buzz that Advisors are joining them, and that it’s a good place to work. If you have 18,000 Advisors and have a mere 8% attrition (a very low number that firms would kill for right now), then you better be hiring 1,440 Advisors just to stay even. And since the Biggest Firms are having a tough time distinguishing themselves from each other in the eyes of Advisors, they are defaulting to a bigger check. AdvisorLand is more of a bifurcated market than ever before with the total packages from the Biggest Firms being 50-100% more than the regionals and the boutiques.
It’s one thing to give the biggest checks to the biggest Advisors, but why are ML and MSSB giving big checks to the same level of Advisor that they ignored when they gave retention checks out a year ago?
I guess that any production in a desk is better than no production and an empty desk in their eyes. At the time of the Joint Venture with Smith Barney, MSSB management had an unenviable business problem of too many Advisors and not enough money to give retention packages to everyone. Merrill had the same problem with the B of A takeover. A year later, the need to fill the empty desks and keep headcount high trumps any institutional memory of fairness. So, even though a $400,000 producer was ignored at retention bonus time, regardless of his or her tenure at the firm, a new $400,000 producer will be paid big money to fill the empty office next door.
This must be good for the career $400,000 producer, right?
Look, if you are at that level, and need the cash, then go for it. But as I’ve written before, I just don’t think a career $400,000 producer should be at a Big Firm. You only get to keep the money if you stay at the firm for a long time. And if your production falls, you will be dangerously close to the “penalty box” where your payout gets cut. Branch Managers are embarrassed by this change; they are recruiting the guys that they turned away a few months ago and pissing off long-term employees of the same level who were told just a year ago that there was no money for them at all.