Merrill Lynch has launched a new benefit program for its army of 15,700 brokers that will provide financial assistance to their families in the event of their death. The added death benefits include a lump-sum payment based on a flat 36 percent of the broker’s trailing 12-months production. The program, effective Jan. 1, 2007, is in addition to the standard accidental-death insurance package that links benefits to an employee’s salary.
The new program comes just a few months after the death of Delio Luis Gonzalez, a 36-year-old broker at Merrill’s Coral Gables, Fla., branch, who was killed in a tragic helicopter crash. He was among four men killed in October when resort tycoon Howard “Butch” Kerzner’s private chopper crashed in the Dominican Republic. Gonzalez is survived by his wife and infant child. He had been with the firm for 13 years. Merrill spokeswoman Jennifer Grigas denied any link between his death and the launch of the new FA benefits program.
The move also comes amid intense competition among rival brokerage firms for FAs, a recruiting war that has driven sign-on bonuses to as high as 150 percent to 200 percent of trailing 12-months production. Grigas says the move is part of an “ongoing evaluation” of its employee benefits and that attracting Wall Street’s best and brightest would merely be an added, albeit unintended, bonus.
“Our new Financial Advisor Death Benefit program marks a significant milestone in Merrill’s effort to provide its advisors and their families with one of the best benefits platforms in the industry,” said Phil Seig, head of Merrill’s global private client strategic leadership and development, in an emailed statement.
Recruiters, however, say it is definitely aimed at keeping retention levels at an all-time high. They also say it’s timely because a bulk of the industry’s top producers are members of the baby boomer generation, which, with its advancing age, are more susceptible to sudden illnesses. Firms will be hard-pressed to replenish the crop of veteran brokers headed toward retirement.
What does it mean for reps? “It’s definitely a plus for FAs who are going to work until the end. They didn’t get anything in the past,” says Andy Tasnady, a compensation consultant at Tasnady & Associates in Port Washington, N.Y. “But it probably doesn’t do much for FAs who are planning on retiring.”
Under its basic group life insurance, Merrill pays the premium on coverage equal to a rep’s highest year’s eligible cash compensation. An FA’s coverage increases each year as his eligible cash comp increases, capped at $500,000. Reps can also opt to buy contributory group life insurance up to eight times their eligible compensation, up to $10 million; provided they prove they’re in good health.
To allow for a smooth transition, the deceased FA’s book of business will be redistributed to other advisors in the branch. But advisors receiving those accounts will earn a lower payout based on a scale identical to the parameters of the client-transition program that is applied when brokers leave the firm. Instead of getting full credit immediately for serving inherited accounts, Merrill reps will get paid for 50 percent of new business they generate from a deceased colleague’s clients during the first two years, with credit rising exponentially to 60 percent in the third year, 65 percent in the fourth year and, eventually, 100 percent in the fifth year. Previously, brokers were credited on a case-by-case basis with some getting full credit and others getting partial credit.