Are The Wirehouses Stepping Up Trainee Programs Only To Let Even More People Go?

Strange buzz out there that at least Merrill Lynch and Wells Fargo are beefing up their training programs by 20% to 50%, even though both organizations face issues of consolidation and other firms are reportedly letting trainees go.


Merrill Lynch famously joined Bank of America a few years ago and is now wrestling with issues of where its advisory force fits into the sprawling BofA framework -- or even if it does. Bringing on a reported extra 800 trainees in that kind of unsettled environment seems like a waste of good potential and a lot of money.


Famously, training just one viable rep can take $300,000, so beefing up the "thundering herd" at this uncertain juncture translates into an extra $240 million in training expenses that BofA may be unwilling to spend beyond the $480 million that a normal 1,600-rep Merrill class entails.


How many of these reps will wash out before becoming viable producers -- that is, how many will fail to justify the initial investment? Reportedly 80% drop out in the first three years, so Merrill must be hoping the survivors can generate $3.6 billion, $2.25 billion apiece, over the course of their time at the firm.


That actually sounds a bit more reasonable, but could easily amount to 10-11 years of tenure for every rep.


Wells Fargo is also reportedly hiring a lot more trainees, which makes sense only in the context of the bank's rumored merger with UBS. If the merger is on, again, it seems a bit disingenuous to suppose that the merged firm will need quite so many trainees.


And with rumors of Morgan Stanley, for one, theoretically gearing up to cut hundreds of trainees and low-performance brokers, it seems like there might be too much inexperienced but relatively inexpensive talent out there very soon.

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