Merrill Lynch released its compensation plans for 2016 on Wednesday and while it is not changing the payout for its bigger-producing brokers, it increased the productivity range thresholds by $50,000 for advisors who generate less than $1.5 million in fees and commissions.
The Wall Street Journal reported that to qualify for a 41 percent payout, advisors earning $600,000 in fees and commissions this year will have to earn $650,000 in 2016. Those who do not could see their upfront cash pay drop over 8 percent, depending on which new production range they fall under.
The firm—which hasn’t modified its grid since 2009—says the updated productivity ranges have been put in place to help its 14,000 advisor force grow their fee-based businesses to be well-positioned if the Labor Department’s fiduciary rule comes to pass. At the end of the third quarter, about 54 percent of Merrill advisors had half or more of client assets in a fee-based account. Overall, average advisor productivity has increased from $525,000 to over $1 million among Merrill brokers with the firm since 2009.
Merrill recommends that advisors looking to achieve the additional growth bring in new clients, join a team—about 30 percent of its advisors still operate as solo practitioners—and take a larger share of current clients' finances. The firm pays advisors on their referrals to other units of Bank of American, including the commercial and investment banks. The referral payout applies to the introduction only, not the outcome.
To gain more referrals, the brokerage will require every adviser make at least one introduction next year. For those who do not, the firm will deduct a percentage point from their long-term compensation. This is a change from the 2015 policies, which only required one referral from each advisory team in order to avoid the penalty.
Merrill is also broadening its strategic growth award, which rewards advisors for bringing in new assets. Currently, only advisors with 10 percent or more in net new assets flows are eligible; next year advisors will be elgible with just 7 percent.
The firm is also changing up the mix of its long term incentives. Before, the default award issuance was 50 percent towards its WealthChoice program, a cash-based account with returns pegged to selected benchmarks, and 50 percent in restricted stock units. Now advisors can opt for a 75% WealthChoice and 25 percent restricted stock spilt.