Bank of America Corp., which lost a financial adviser 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 at B of A's U.S. Trust unit received the notice last week ahead of bonus payments and were told continued employment hinged on agreeing to the policy, said a person with knowledge of the notice. Advisers who previously could resign after two weeks are now barred from soliciting their clients for 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, the president of Diamond Consultants LLC, an executive search firm. "It's very rare that a company would have garden-leave provisions for producers, and I think this could backfire."
Sallie Krawcheck, the head of B of A'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 Brown, whose clients had a typical net worth of $50 million. He joined a start-up co-founded by former Citigroup Inc. executive Todd Thomson.
William Halldin, a B of A spokesman, declined to comment. The policy affects some of U.S. Trust's 4,000 employees. B of A, of Charlotte, N.C., is first among U.S. lenders by assets and deposits.
At U.S. Trust, those who elect to resign "may be assigned whatever duties" the firm decides during a 60-day leave, based on the policy. They will forfeit bonuses and must wait another six months before soliciting former clients or colleagues to join their new venture.
Garden leave, used in the U.K., refers to the period after giving notice when an employee remains on payroll while hypothetically not doing anything connected to the brokerage industry.
Employees must agree that they are not subject to the so-called broker protocol, a voluntary recruiting agreement that allows departing advisers to solicit clients without getting sued.
Whether U.S. Trust advisers were part of the protocol was disputed in the lawsuit B of A filed against Brown and three of his colleagues in December. The bank settled the case in January for undisclosed terms.
"Your employment is further conditioned upon your agreeing" to the terms of the letter, B of A wrote last week. "Should you not comply with these terms, you agree that the company shall have the right to enforce them" through court-ordered actions.
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 up to 350% of an adviser's trailing 12-month revenue, Diamond said.
The policy "could hobble their efforts in recruiting," said Jonathan Henschen, a broker recruiter in Marine on St. Croix, Minn. "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."
