merrill lynch

Merrill Lynch Adjusts Comp Plan to Spur Growth, Entice Advisors to Stay for The Long Haul

The brokerage increased the payout opportunity for advisors to transition clients as they near retirement, among other changes.

Merrill Lynch has adjusted the compensation plan for its advisors in hopes of growing the business and enticing advisors to stay with the brokerage for the long haul.

The company sent a memo, reviewed by, to its roughly 15,000 financial advisors on Wednesday about the changes coming in 2018.

The headline changes to the plan were made to the so-called grid, which lays out cash and long-term compensation based on an advisor’s production. In the new program, Merrill Lynch is offering an additional 2 percent increase to an advisor’s compensation to incentivize the acquisition of new clients and net new assets. However, if an advisor doesn’t meet minimum growth hurdles, their compensation will be reduced by 2 percent.

To qualify for the 2 percent bump, advisors will need to grow net new assets and liabilities a minimum of 5 percent compared to the prior year-end assets and liabilities, capped at $15 million. They also are expected to gain at least five new households with at least $250,000 or more in investable assets or two households with at least $10 million. Good advisors won’t find the hurdles difficult, according to Jay Feldman, a coach and consultant to advisors.

Feldman, who was previously an executive director at UBS Wealth Management and has been in the brokerage business for more than 35 years, said the punitive hurdles are a “different twist.”

As a manager who attended many meetings on compensation plans and fielded questions about them from advisors, Feldman said he can understand consequences for lack of growth from both sides. The brokerages want to responsibly incentivize advisors to produce more, but when firms begin “taking points off the board,” even marginal differences can mean substantial amounts of money in an advisor’s pocket, he said.

To avoid the 2 percent penalty, advisors must grow net new assets and liabilities a minimum of 2.5 percent compared to the prior year-end assets and liabilities, up to $7.5 million. Advisors also need to add a minimum of three $250,000 households or one $1 million household. Again, if both aren’t met, the advisors cash compensation will be reduced by 2 percent.

An advisor’s 2 percent bonus will also be dependent on sending at least two outbound referrals, which was already a grid requirement from this year. Merrill Lynch eliminated the 1 percent penalty for failing to make referrals.

Unlike programs in the past, advisors will be compensated based on all assets and liabilities with the brokerage, rather than products.

Merrill Lynch also shifted 1 percent of the advisors’ cash compensation to their long-term compensation and gave lower producers a significant pay bump. Advisors with $250,000 to $349,000 in annual production will now get 35 percent cash, compared to 25 percent. Those producing $0 to $249,000 now get 34 percent, up from 20 percent. 

The brokerage also introduced a new client transition program and significantly increased the payout to advisors retiring from the firm. Assuming assets continue to grow during the maximum five-year transition period, advisors can now earn up to 240 percent of their production.

“Retention and key performers is what this [plan] is about,” Feldman said.

Whether it’s enough to keep advisors from trickling into the independent space remains to be seen. In recent years, many top producers have left the wirehouse channel to start their own independent registered investment advisories. But tweaking a few numbers isn’t a silver bullet for retention. 

“I always try to advise them not to think that by just tweaking a number you’re going to change behavior,” said Andy Tasnady, owner of Tasnady & Associates Consulting, which advises on compensation packages at brokerages. “The rest of the [brokerage’s] strategy and the business implementation, that will get you the successful results.”

UBS, Wells Fargo Advisors and Morgan Stanley have yet to make changes to their 2018 compensation plans public. 


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