When Bank of America Corp. gave its U.S. Trust advisors notice in February that they were subject to "garden leave restrictions" if they left the company, it initially sent shock waves through the industry.

That's because wealth management firms largely follow a broker protocol, whereby an advisor cultivates a personal relationship with clients and has ownership of their business.

A garden leave restriction, most often applied to other areas of business-like management, would require an advisor to not only stay with a firm for a certain period of time, but also hold off on contacting existing clients.

As the debate around U.S. Trust's garden leave restrictions continues, Bank of America put to rest worries about such restrictions on its Merrill Lynch wealth unit in March. Merrill Lynch will remain under the broker protocol.

Mindy Diamond, president and chief executive of Chester, N.J.-based recruiting firm Diamond Consultants, calls the garden leave policy an "anti-brokerage firm phenomenon," and notes that the decision to leave Merrill Lynch's rules unchanged was expected in the industry. "The internal chatter amongst Merrill Lynch advisors was, 'If they do that, that's it. I'm out of here,'" Diamond says. "I am certain if I was hearing it as an outsider, senior leadership had to [receive] a lot of questions."

The U.S. Trust garden leave policy maintains that advisors could take a leave from the firm for up to 60 days, during which time they may or may not have work assigned to them. The advisors would also have to wait six months before soliciting business from their existing clients. Ultimately, those employees must agree that they are not subject to the broker protocol practices in place at other firms.

The new rules — likely sparked by last year's departure of U.S. Trust advisor Michael Brown, who reportedly managed and took roughly $6 billion in client assets to Dynasty Financial Partners — come as the firm begins aggressive efforts to beef up its advisor force.

According to U.S. Trust spokeswoman Lauren Sambrotto, however, the move toward one overall garden leave policy at U.S. Trust simply extends existing policies that have been in place for some but not all of the firm's advisors. "[During] this recruitment and hiring process, we learned that many of these professionals have been subject to garden leave policies at other institutions that were more stringent than ours," Sambrotto says. She declined to name specific firms, however.

She added that the garden leave restrictions provided more protection to U.S. Trust's clients. "We're just making sure that our clients — their privacy, their proprietary information and their interests — are all protected," Sambrotto says. "The clients have expressed their appreciation and approval on this part."

U.S. Trust's team-based approach to clients does make them less portable than they are at other practices, like Merrill Lynch or Morgan Stanley, Diamond says.

While a client has no obligation to a firm and can decide to follow an advisor who leaves, recruiting that advisor to a firm with a garden leave policy in the first place can be a challenge. "No advisor is going to be happy or be seeking to be recruited by a firm that imposes such a Draconian employment agreement," Diamond says. "The message behind the action is: 'We're the big hands. We control you. You're not really independent or entrepreneurial.' And that's the antithesis of the model in which advisors want to work today," she adds.

Darrin Courtney, a research director focusing on wealth management at Needham, Mass.-based research firm TowerGroup, agrees. He says that U.S. Trust's garden leave policy runs counter to the direction that most firms are going toward joining the broker protocol.

The broker protocol, which was initially established in 2004, now includes about 600 members, Courtney says, with RIA firms and others eager to join to make brokers feel more comfortable joining them. Even an entry-level employee might be reluctant to join under garden leave rules. "You're kind of cutting off your nose to spite your face if you put clauses like this in place that are too stringent," he says. "You won't lose advisors, but you're not going to be able to attract advisors," Courtney says.

The U.S. Trust model leads to advisors with a different set of skills, says Scott Smith, associate director at Boston-based research firm Cerulli Associates. Those advisors may have strong relationship management skills, but do not excel at asset gathering and prospecting.

As a result, any business lost when an advisor leaves can be more difficult to replace. "If it's $10, $20 or $30 million in assets under management, every time somebody leaves, that's significant," Smith says. "On the Merrill side, you lose a client with $2 million in [assets under management] that's not awesome, but you have those asset-gatherer advisors who can go out there and replace them."

The industry reaction to U.S. Trust's garden leave rules comes as large wealth management firms are still going through a nervous time, says Alois Pirker, a research director focusing on wealth management at Boston-based independent research firm Aite Group.

And, that can lead to reactions similar to the stock market, with advisors waiting for signals as to where the best place is to work, Pirker says.

But putting down such strong rules on U.S. Trust advisors shows a strong commitment from Bank of America to that franchise, Pirker says. After U.S. Trust moved around under the ownership of Charles Schwab and others over the years, he says, this could be a defining moment for the unit, as well as of Bank of America Merrill Lynch, as long as they get the trust and brokerage sides to work together. "There's a continuum on the wealth side," Pirker says. "You have Merrill Edge at the bottom. You have Merrill Lynch in the middle, and you have U.S. Trust at the top. And if you integrate those franchises well, I think it could be a great place to work."

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