Merrill Lynch released its 2015 advisor compensation changes Wednesday, showing enhanced payouts for new fee-based assets and new clients, while eliminating provisions on mass affluent accounts and reducing payouts on bank deposits.
While the Bank of America-owned firm is not making any changes to its core grid, Merrill Lynch did tweak several aspects of its Strategic Growth Award program. Advisors are eligible for three times the payout for two or more net new households, and double the base payout for new "strategic flows," including fee-based assets and lending.
“Our compensation plan directly supports the execution of our strategy and provides incentives for our advisors to grow, increase client satisfaction and strengthen relationships,” said Merrill Lynch spokeswoman Susan McCabe.
The 2015 changes also eliminates the exceptions it granted to advisors when it moved to a $250,000 minimum household requirement three years ago. Advisors that have less than 20 percent of their clients under the $250,000 cap can earn 20 percent on those relationships. But smaller advisors with more than 80 percent of their books with $250,000 households will not earn a payout. Clients with less than $250,000 in assets are “well served” by the team in the Merrill Edge Advisory Center, the firm said. McCabe added that advisors are not prohibited from taking on clients with less than $250,000 in assets, but rather, that they just may not get paid on those relationships.
"There’s no question there was handwriting on the wall here,” says consultant and recruiter Mindy Diamond. “I can tell you top teams have railed against policies like this. It’s about control,” she says. Changes like this irritate brokers at the wirehouses, she said, even if it doesn’t affect them because it symbolizes a limit to advisors’ discretion to manage their client relationships.
Merrill is also reducing payouts on all bank deposits & money funds from 8 basis points to a 4. Spokeswoman Susan McCabe said this was still higher than other wirehouses like Morgan Stanley and UBS, which pay zero basis points on cash deposits.
Firms don't make any money on cash deposits and would rather incent advisors to put client money in an ETF or other security, said consultant Howard Diamond.
Merrill is also paying advisors on their referrals to other sectors of Bank of American, including the commercial and investment banks. The referral payout applies to the introduction only, not the outcome, McCabe says. For instance, a client who owns a business might be introduced to a commercial banker.
“Our plan offers incentives for all of our advisors to ensure all clients have access to the full range of available solutions provided by Bank of America, particularly with the Investment Bank, Business Bank and Commercial Bank,” McCabe said.