Bank of America recently
settled a lawsuit originally filed in March 2015 that alleged Merrill Lynch had violated federal overtime compensation laws. Each aggrieved ex-Merrill Lynch trainee would be entitled to about $1,000 after legal fees were paid, according to the press coverage of the settlement.
I spoke with four separate Merrill Lynch advisers, each with at least 20 years of experience, who all expressed some combination of distaste and disdain for the plaintiffs. Each adviser vividly recalls attending meetings during the 1980s where a successful veteran adviser spoke to his training class. The message from the veteran resonated with these advisers 30 years later: “Work like very few can for three years, and then you will be able to live like very few do for the next 30 years.”
Long hours dedicated to establishing relationships with new clients were an understood part of the job. Methodologies varied. Some trainees spent hours attempting to call prospects at home after the dinner hour. Others spent their time organizing and setting up seminars to attract potential investors. And there were many who endlessly networked with business owners in their communities.
Management in the branch offices encouraged and nurtured these activities. Advisers who were three to five years removed from training programs with their own experiences fresh in their mind were paid to be mentors to the latest groups of trainees. I believe these advisers, who were trained in the mid-1980s into the 1990s, form the backbone of the Merrill Lynch adviser population today.
There is no doubt that it is harder to build a financial advisory practice today than it was 30 years ago. The public is more cynical of the wealth management industry, and caller ID technology and do not call lists make cold calling a challenge. Wirehouse training programs are struggling to increase their success rates. I'm told only 10% to 20% of trainees are still with their firms after three years.
My four contacts acknowledge the challenges of building a business today. However, they know that hard work and long hours must be part of any new adviser's routine. Said one: “The idea that a new adviser can be successful while working a basic 9 to 5 day in the first few years is ludicrous.”
Another asked: “Can we sue the PMDs [trainees] who did not work 40 hours a week for wasting our money?”
There must have been some trainees during this timeframe who did succeed and who are now reaping the financial rewards from their hard work. I doubt as their personal take home pays rises into the mid-six figure range they will think the unpaid overtime they put in was not a worthwhile investment in their future. I understand the veterans' disdain for the failed advisers' allegations; surely these trainees knew long hours were not only expected, but absolutely necessary to be successful. It is the rare substantive producer who does not have memories of the long hours put in during the first few years of their career.
I do, however, believe that Bank of America shares the blame. Overtime compensation cases are not new to the industry. In the last 11 years, numerous firms have settled multiple cases to various factions in the industry. Googling “Merrill Lynch overtime settlement” brings up cases dating back to 2006. Surely Merrill Lynch training executives both knew of their overtime obligations, as well as the fact that harder work (i.e. longer hours) begets more successful trainees.
Failed trainees who thought they could be successful without putting in the long hours were just naive; their $1,000 reward as part of the lawsuit is a laughable booby prize for what could have been a lucrative long-term career. But if Bank of America Merrill Lynch executives expected trainees to work long hours without being compensated for their overtime, then they deserved to lose the lawsuit.
Perhaps it would have been useful for a training executive to quote the successful trainer from years ago and to add the following language: “While you are not required to work long hours, we can tell you that those who do have a greater chance of succeeding. In addition to your regular compensation that is part of the training program, we will pay you for the overtime hours that you put in. The incremental investment that we are making in you is both legally required and a show of good faith indicating that as a corporation, we are willing to put our money where our mouth is. We will pay you to work the longer hours that we feel is an imperative part of building a successful financial advisory practice.”
Danny Sarch is the founder and owner of Leitner Sarch Consultants, a wealth management recruiting firm based in White Plains, N.Y.
