Forget about that so-called recruiting “truce” between Merrill Lynch and Morgan Stanley.

It doesn’t exist.

And forget about the idea that signing bonuses for top broker recruits might drop any time soon -- another suggestion found in a recent Bloomberg News report.

Chalk up the “truce” story to over-caffeinated headline writers. And the idea that recruitment deals might shrink, we can probably attribute to wirehouse execs’ wishful thinking.

The fact is, big money for big brokers isn’t going away. “It’s a simple case of supply and demand,” said recruiter Danny Sarch, founder of Leitner Sarch Consultants Ltd. “You can wish away [deals] all you want,” but offers will stay high due to growing demand for advisors and falling supply, he said.

True, advisor movement has slowed this year with the strong equity market, cutting the number of big packages.
But the simple fact is that normal attrition will force firms to continue recruiting  experienced advisors.

Sarch figures a typical firm loses at least 3 percent of producing reps each year through natural causes like death, disability and retirement. Another 3 percent might leave for a competitor. So a 15,000-broker firm would need about 900 new bodies per year.

“How are you going to replace that?” Sarch asked. “The industry hasn’t been minting these guys, and they’ve been retiring at a faster pace than firms can replace them.”

The big firms are “acutely aware that the Street watches their headcounts … and managing that is a big part of the business,” said John Palazzetti, director of private banking and advisory at Fieldpoint Private Bank and Trust, and a former managing director at Smith Barney.

“I’d be shocked if they backed away” from their big deals, he said.

“Until you can replenish through training and organic growth, you will have these crazy prices” for broker recruits, agreed recruiter Bill Willis, founder of Willis Consulting Inc. But “it takes capital and patience” to grow a sales force, he said, “and  [patience] is what Wall Street is really short on.”

Spokespersons for Merrill Lynch and Morgan Stanley declined to comment on their deals or provide turnover data.

Merrill spokeswoman Susan McCabe did say that the firm was seeing its lowest “net competitive losses” of brokers since the fourth quarter of 2010. Turnover of top producers was at “historically low levels,” she added.

The big unknown looming over the recruiting arena is the proposal that the Financial Industry Regulatory Authority (Finra) will be filing with the SEC to require disclosure of recruitment packages to clients.

Some observers, like recruiter Darin Manis, chief executive of RJ & Makay LLC, feel the kind of transparency Finra is pushing for might cut the size of deals or change their structure, and maybe even slow turnover.

“The majority of advisors’ clients think $1 million or $2 million is a lot of money for just changing business cards,” Manis said. Customers may ask for discounts or be tempted to sue a deep-pocketed broker over losses, he said.

The big firms certainly hope disclosure will cut the cost of recruiting, said Brian Hamburger, founder of MarketCounsel LLC.

“But it won't last,” he said. “It's like airfares -- once one firm makes a change the others will just have to follow.”
But Sarch, who advises broker-recruits to disclose their deals (since losing firms always bring it up anyway) says most clients don’t care about signing bonuses, especially wealthier ones.

And mandatory disclosure of deals won’t stop the flow to independent channels--in fact, it might accelerate the move, Manis said.

Independent firms’ offers “aren’t quite as eye-popping and they’re more explainable [as] a loan to help me build my own practice,” he said. In the pure RIA channel, inducements wouldn’t have to be reported under the Finra rule.

The bottom line: Simple attrition and the need to stay competitive means the big firms’ recruitment checks aren’t going away.