The problem is that too many producers qualify. Merrill Lynch is upping the achievements required for its recognition clubs and incentive trips. The reason: Too many million-dollar producers, say veteran brokers at the firm.
Private Client Group President Stanley O'Neal mentioned the impending changes while speaking to several groups of million-dollar producers during club trips to Alaska in July and August, according to one broker who was there.
While O'Neal did not issue new qualifications, he did explain that the firm would be raising club standards to make sure membership remains meaningful to brokers.
The firm did not respond to requests for comment on what the new standards might be.
About 2,000 broker members of the firm's Circle of Excellence club ($1 million-plus producers) qualified for the Alaska trips this summer, according to the rep.
"In my district alone, there are 55 million-dollar producers. It's nuts," says a producer in the Southwest. "The list is three pages long!"
Why so many big producers at Merrill? "Exploding production and a reduction in turnover," explains a broker in the Midwest. "People aren't leaving the firm. The [firm's deferred compensation plan] handcuffs you here. There are brokers with seven-figure stock awards they lose if they leave."
In fact, this broker says that during the flight to Alaska he sat next to a 23-year Merrill veteran who had just cracked the $1 million barrier for the first time, thanks to compounded interest.
Because the ranks of million-dollar producers have swelled so quickly, Merrill has cut back on the exotic destinations incentive trips used to feature. In the past, trips to the Olympics were typical. But the Circle of Excellence trip scheduled for April 2001 is to Maui, a broker says.
Another change has made it easier for Merrill brokers to earn Chairman's Club and Circle of Excellence status. For the past year, Merrill has qualified brokers for recognition based on one of two measurements: either total revenues or gross production, whichever is more favorable for the producer, says a broker in the East.
Brokers who do large fee business have applauded the move. "It's awesome," the rep says. "With a wrap-fee product like Consults, the fee is 3%, but in the past we only got production credit for 2.2% after paying the manager."
However, a stock trade that generated $100 in commissions always generated $100 in production credits. "Now the firm is recognizing people doing the more profitable types of business - not the transaction junkies," he says.
O'Neal also told Circle of Excellence brokers that there are enough reps generating between $5 million and $10 million in revenues annually to recognize them as a separate group and reward them accordingly.