Bloomberg News

BofA Said to Shift U.S. Trust Bonuses to Gain Clients

February 07, 2013

Bank of America Corp. (BAC:US) shifted bonuses at U.S. Trust to focus employees on adding clients and boosting account balances, a change that could mean lower pay for some members of the wealth-management unit.

Client managers at the private bank (BAC:US) will have awards this year pegged to new balances including deposits, investments and loans, said two people with knowledge of the formula. Bonuses had been tied to total client revenue, said the people, who asked for anonymity because compensation plans are confidential.

“The individual who’s worked 20 years to build up a really strong book of business and is used to getting paid in almost an annuity stream is not going to be happy about this, because it could reduce their income,” said Dick Risch, founder of New York-based Risch Group, a search firm specializing in private banking and wealth management.

Bank of America has worked to boost its sagging income (BAC:US) by catering to the wealthiest families with units such as U.S. Trust, acquired in 2006 from Charles Schwab Corp. The business, with roots reaching back before the Civil War, has underperformed BofA’s much larger Merrill Lynch brokerage as revenue fell 3.7 percent to $2.6 billion last year, while Merrill’s rose 1 percent to $13.8 billion.

Some managers (BAC:US) fear their income will drop because the changes favor those with rapidly growing portfolios, said one of the people. Workers will have greater control over their pay and the chance to earn more than previously, said another person. Lauren Sambrotto, a company spokeswoman, declined to comment.

New Business

The private-client manager position was overhauled late last year by the Charlotte, North Carolina-based bank to emphasize revenue growth and encourage them to support the “private-client advisers,” whose main responsibility is to bring in new customers with a minimum of $3 million in investable assets.

A typical U.S. Trust team also has a portfolio manager to oversee investments, a trust officer to ensure the firm adheres to the legal rules of a specific trust and a sales and service officer who handles administrative duties. The unit had 2,077 employees (BAC:US) dealing with clients at the end of 2012, a 7.6 percent drop from the year earlier.

Bank of America is the nation’s second-largest lender by assets and U.S. Trust, run by Keith Banks, is the country’s biggest company managing trusts, the firm has said, citing Federal Deposit Insurance Corp. data. Trusts are typically set up by wealthy families or institutions to handle assets for offspring or charities.

Merrill Lynch

The compensation changes mirror those at Merrill Lynch, the so-called “Thundering Herd” of 15,000 financial advisers that Bank of America acquired in 2009 during the financial crisis. Merrill Lynch introduced new bonuses to reward brokers who encourage clients to use more of the lender’s products.

Advisers who increase funds including deposits, investments and loans by at least $5 million to $25 million will be eligible for the awards this year, John Thiel, head of the brokerage, said in December.

Bank of America Chief Executive Officer Brian T. Moynihan has emphasized the importance of Merrill Lynch in helping the company sell existing clients more products. U.S. Trust has been the subject of speculation that it could be sold since at least 2009.

Last year, U.S. Trust eliminated some managers overseeing trust officers and private-client advisers, said people with knowledge of the dismissals. The company also banned non- essential travel to save money, the people said.

Bank of America shares more than doubled in 2012 for the best showing in the Dow Jones Industrial Average and added 2.8 percent so far this year, closing at $11.93 yesterday.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Rick Green at rgreen18@bloomberg.net


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Companies Mentioned

  • BAC
    (Bank of America Corp)
    • $17.0 USD
    • -0.04
    • -0.24%
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