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Merrill Sweetens Advisor Transition Packages in Bid for Retention

The changes, which include increased payouts for advisors at retirement, could keep more reps in their seats.

In a memo sent to advisors earlier this week, Merrill Lynch Wealth Management President Andy Sieg announced a number of changes to the wirehouse’s client transition program, its transition plan for retiring advisors, aimed at improving advisor retention.

Sieg had announced on a recent earnings call that there would be no changes to the company’s grid compensation program in 2020. The client transition program (CTP) changes will go into effect in November 2021.

For the Bank of America unit’s highest producers of $7.5 million or more, the award percentage payout rate will increase by 75 percentage points to a base level of 200% and a maximum level of 275%.

Merrill is restoring the fixed payout for all “active senior consultants,” who it defines as advisors who have been with the company at least five years and are at least 55 years of age. Those two numbers need to add up to 65 to qualify for the program. Merrill claims it is the only company in the industry with a fixed payout.

The company is also creating a floor on the CTP award percentage for advisors who are top-tier and longer-tenured. Payouts are calculated when advisors enter the program; it’s calculated by multiplying an advisor’s trailing 12-month production by their CTP award percentage, which will be floored at its current level. The percentage can increase and reset to a higher level in later years but will never fall below the current level.

The recovery payout structure for inheriting advisors is also being modified. Inheriting advisors will continue to be subject to a 50% payout, but, going forward, that payout will continue until 80% of the CTP award is recovered. As a result, advisors who grow their practice will have the opportunity to shorten the recovery period, but the recovery period will be limited to a maximum of eight years. Regardless of the recovery period, the firm will subsidize 20% of the CTP payment.

Merrill is also providing the ability for $5 million-plus producers to partially transition their business to their team before fully entering the transition program.

The company will not be adding incremental documents for advisors to sign related to the program, and there will be no noncompete or nonsolicit agreements, according to Kirstin Hill, managing director and strategic performance executive at Merrill.

Scott Smith, an analyst with Cerulli Associates, called the move “a great advancement for Merrill. Inertia works in two ways, and if for an advisor at Merrill the easiest thing is to stay and monetize the book, then that would be the path of least resistance.”

The program also provides more continuity for clients, Smith added.

“It’s a matter of allowing for continuity for clients so minimizing the number of advisors who leave minimizes the number of clients having to change to a younger advisor.”

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