Merrill Lynch Contemplates $100,000 Household Minimum
Policy would end payout on transactional business in smaller accounts.
Merrill Lynch is considering a new policy requiring a household to have at least $100,000 in assets at the firm in order for the broker to receive any payout on transactional business.
Currently, Merrill reps receive no payout on transactions by households with less than $20,000 at the firm, and just 20% for households with less than $50,000. An exception is made for "annuitized" products such as mutual funds, insurance and fee accounts, all of which earn the normal grid payout.
Merrill spokesperson Jim Wiggins confirms that James Gorman, executive vice president of retail, floated the idea of a $100,000 minimum before branch managers during a September meeting in Greenbrier, W.Va.
Meanwhile, the firm continues to encourage brokers to move small accounts to its Investor Services Group (ISG). ISG has offices in Somerset, N.J., Denver and Jacksonville, Fla., which provide clients with around-the-clock access to Series 7 registered reps through a toll-free number. Brokers earn normal payouts on any accounts they refer to ISG.
In a speech to analysts in September, Private Client Group President Stanley O'Neal said Merrill's "direct" channels - such as ISG, ML Direct and its Benefits OnLine service for 401(k) participants - will grow. "We expect that many of our existing clients will choose over time to migrate some or all of their assets into this channel," O'Neal said.
Reps Have Concerns One Merrill producer in the West thinks the minimum-account-size concept is flawed. "We came into this business with a purpose - to take a member of the middle class and pull them up into a higher quality of life," he says. "We lose the opportunity to be that hero."
"This $100,000 minimum is going to hurt us," says another Merrill broker in the South. He worries that the move could be especially damaging to brokers in Merrill's suburban branch offices. "We don't walk down the street and bump into millionaires around here."
Wiggins counters that when smaller clients leave the firm, they generally complain about the level of service they received from brokers. "We would like to see an increase in the number of these types of accounts handled by ISG because we can deliver more value this way," he says.
In early November, O'Neal and Gorman were still collecting feedback from brokers on the proposed new $100,000 household minimum, Wiggins says.