Sunday, March 30, 2008

J.P. Morgan Offers Retention Deal To Bear Reps

JP Morgan would certainly like to hold on to the Bear Stearns reps - or at least their assets...or does it?

First, reps who gross less than $250,000 a year can apparently take a hike. No retention bonus for them, or at least not one that has been announced.

For reps in the $250,000 to $500,000 range, the offer is 25% up front in cash, 25% in stock. For those over $500,000, the offer is 75% cash, 25% stock, up front, plus and additional 50% stock, 50% cash in three years, of the average production over those three years.

Good deal? Not so much. First, that "bonus" is not entirely a bonus, it is structured as the usual forgiveable promissory note, at least on the cash side. There is some confusion (which may just be me) as to whether it is a 7 year note or a 9 year note. Seven years is a long time, and committing to 7 years, or losing the bonus, at this shaky moment in history is not a comforting thought.

However, given the fact that no one is giving signing bonuses without a 7 or 9 year note (I remember when these notes were for 100% over 3 years!), the note portion of the bonus may not matter. The problem is in the size of the bonus - million dollar producers are getting offers of closer to 200%, not 100%, at other firms.

Sure, sure, there is the "no ACAT" part of the equation that has got to count for something, but how can you sign on for 9 years at a firm that is in such upheaval? You like your manager? Sure, but he might be gone next year. You like your location? Sure, until Morgan closes your branch and consolidates it with the one 30 miles away. There are hundreds of reasons to leave a firm, that are completely out of your control.

And then there is that "bank" thing. Bankers just don't "get" the retail securities business. Although there probably isn't any way to avoid that these days.

Then again, I don't see anyone offering attorneys 100% of their trailing 12 as a bonus to jump ship, so maybe "free" money is a good thing. But play it smart -get an attorney to review all of the documentation so that you know what you are getting into. If you are a million dollar producer, do some negotiating on the terms of your employment while you are having those discussions - and get the promises in writing. Then take the money, put it in a CD and draw it down every year. You may be looking for a new home next year.

And remember to pay the taxes on that bonus - whoops, there goes another 40%.

Special Note to Bear Stearns Reps - before you jump on those ERISA Class Action lawsuits, give me a call.
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