Merrill Lynch is working on a new compensation plan that will encourage brokers to focus on wealthier households and sell a broad array of products and services. Though nothings been released officially from firm headquarters, Merrill brokers nationwide have heard rumblings about the change for several months now.
Were being told changes are coming at the end of this year, says one West Coast Merrill rep, who claims his manager told his office that the new plan will be similar to the firms current Masters contest. Broker pay will be based on the entire client relationship and the number of different Merrill Lynch services being utilized by the client.
Under the new scheme, several reps report, financial consultants would receive a retroactive bonus of 5% to 7% based on the number of premier households in their book. The precise number of such households, apparently, has yet to be announced, but premier households reportedly have been defined as those with more than $250,000 in assets, and those signing on to a fixed number of Merrill products and services (see box). The number of premier households needed for the bonus will depend on a reps production and length of service.
Now [with the new plan] were incented to demonstrate to the client the full range of products and services, says another rep. Reps will get maximum points if a client has high usage of the full array of products. ... If youre a one-trick pony, theyre really not going to reward you.
Reps say Merrill Lynch repeatedly has told its 14,000 reps that a majority of accounts now serviced by the firm are not profitable--even some accounts with high trading volume. The firm has suggested that providing a greater range of services to wealthy clients significantly increases the bottom line. In fact, Merrill is encouraging its financial consultants to give up some smaller accounts (see Merrill Experiments with Turning Over Small Accounts to Service Bureau, Page 42).
The firm is looking at the profitability of relationships and saying, We dont want to be everything to everybody, but we now want to be everything to an elite few, the West Coast rep says.
One rep at the firm expects the firms grid payout hurdles will be bumped up. Nevertheless, brokers report no dissatisfaction with the anticipated changes.
The whole thing is designed to benefit people doing the right kinds of business and those who want to have a career with the firm. I doubt youd find very many successful reps at Merrill Lynch complaining about it, says one Southwest Merrill broker.
There are concerns that some reps may resent being turned into glorified tellers, as the West Coast broker puts it, and being asked to spend time pushing mortgages and checking accounts.
And the more services a client uses, the more cemented a client becomes to the firm, which further reduces broker mobility, the same rep notes.
Firm research provided to brokers shows that clients using an average of four to seven Merrill products and services are significantly less likely to defect.
One Merrill broker likes that, saying he believes his key clients will be happier with more services offered to them.
Wealthy people want everything [in one place], he says. The firm historically hasnt incented for, say, a charge card, so reps havent shown it to clients. Now, Ill make sure clients know about it.
A Merrill Lynch spokesperson did not return phone calls seeking information on the new compensation plan.