(Bloomberg News) Bank of America Corp., which lost a financial advisor with $5.9 billion in client assets to a rival in December, told some workers to sign agreements forcing them to go on reduced-pay "garden leave" if they plan to resign.
Employees of the bank's U.S. Trust unit received the notice this week ahead of 2010 bonus payments and were told their continued employment hinged on agreeing to the new policy, said a person with knowledge of the correspondence. Advisors who previously could leave after two weeks notice now must remain for 60 days and are forbidden from soliciting clients for a total of eight months, according to a copy of the document.
"They're sending the message, 'Make no mistake, you will incur our wrath, this is not a place you want to leave,'" said Mindy Diamond, president of Diamond Consultants LLC, a Chester, N.J.-based executive-search firm. "It's very rare that a company would have garden-leave provisions for producers, and I think this could backfire if people view it as draconian."
Sallie Krawcheck, 46, head of Bank of America's wealth management division, is seeking to stem defections as rivals jockey to manage money for high-net-worth individuals. U.S. Trust last year lost Michael C. Brown, whose clients had a typical net worth of $50 million. He joined a startup co-founded by former Citigroup Inc. executive Todd S. Thomson.
The document didn't say how many of U.S. Trust's 4,000 employees are affected. The actions were a "streamlining of existing policies" to include more workers, said Susan Thomson, a spokeswoman for the Charlotte, N.C.-based firm, the biggest U.S. lender by assets and deposits.
Garden leave, a euphemism used in the U.K., refers to the period after giving notice in which an employee remains on payroll while not doing anything connected to the brokerage industry. Hypothetically, the time could be spent gardening.
At U.S. Trust, associates who choose to resign "may be assigned whatever duties" the firm decides during the two-month leave, according to the policy. They'll forfeit bonuses and must wait another six months before soliciting former clients or colleagues to join their new venture, according to the document.
Employees must also agree that they aren't subject to the so-called broker protocol, a voluntary recruiting agreement that allows departing advisors to solicit clients without getting sued. Whether U.S. Trust advisors were part of the protocol was disputed in the lawsuit Bank of America filed against Brown and three of his colleagues in December. The bank settled the case in January for undisclosed terms.