"Your employment is further conditioned upon your agreeing" to the terms of the letter, Bank of America wrote this week. "Should you not comply with these terms, you agree that the company shall have the right to enforce them" through court-ordered actions.
The new policy pertains to workers including private client advisors, portfolio managers and trust officers, according to the document. Garden leave is typically part of employment contracts for senior executives, not employees who deal with clients face-to-face, Diamond said.
Enticements to depart a firm are at "an all-time high" with compensation packages at the biggest brokerages worth as much as 350 percent of an advisor's trailing 12-month revenue, said Diamond.
The new U.S. Trust policy "could hobble their efforts in recruiting," said Jonathan Henschen, a broker recruiter based in Marine on St. Croix, Minnesota. "If you have to wait eight months before you can approach your old clients, it will drastically affect your client-retention rate in the first year. People will look at that and say, 'I'm not going there.'"
Weak Performance
Bank of America, citing "weak new relationship acquisition performance," also overhauled U.S. Trust employee compensation by mandating that advisors must add at least three new high-net- worth clients in 2011 to be eligible for discretionary awards, according to a separate document.
U.S. Trust, founded a decade before the Civil War, was purchased by Charles Schwab Corp. in 2000. Bank of America created its wealth management division in part by buying U.S. Trust for $3.3 billion in 2006 and purchasing Merrill Lynch & Co. in 2009. The company has about 20,000 brokers, advisors and wealth-management bankers with $2.2 trillion of client balances as of Dec. 31, according to a presentation.
Added Advisors
Krawcheck's division added about 500 advisors and private bankers last year, a rate that was "somewhat disappointing," Bank of America Chief Executive Officer Brian T. Moynihan told analysts in January. The business reported that 2010 net income slipped by 22 percent to $1.35 billion on higher expenses.
"We'd expect that number to be stronger," Moynihan, 51, said during the conference call. "We need to grow that, because our biggest opportunity inside the United States is around the wealth management space."