Close Close

Technology > Investment Platforms > Turnkey Asset Management

Merrill’s New Comp Plan Pushes Reps to Drop Small Clients

Your article was successfully shared with the contacts you provided.

There’s a new 80/20 rule for Bank of America-Merrill Lynch (BAC) financial advisors when it comes to clients with $100,000 to $250,000 in assets.

Keep these clients to less than 20% of your book of business, and you’ll get a 20% payout. If these “mass affluent” households represent 20% or more of your book of business, that payout will drop to zero in 2015.

Merrill Lynch required its advisors to add households with assets of $250,000 and up three years ago. At the time, existing relationships were grandfathered. 

“We are now eliminating the grandfathering,” company spokesperson Susan McCabe said in a statement shared with ThinkAdvisor on Thursday. “Advisors still have the flexibility to have 20% of their book below $250,000 for strategic relationships, and they will be paid 20% on those relationships. Advisors with less than 80% of their books above $250,000 will not earn a payout.”

In other words, in 2015, Merrill is making another push for clients with less than $250,000 to use its Merrill Edge platform.

“Relationships below $250,000 are well served by our team in the Merrill Edge Advisory Center, as they are better aligned with this client segment and can provide the right service and coverage model,” McCabe explained.

Other Changes

Beyond the shift in how payouts tied to mass-affluent clients are treated, the core compensation grid for the Thundering Herd remains largely unchanged next year.

The wirehouse is, however, enhancing its strategic-growth award to further reward FAs bringing in new clients.

For instance, the base payout moves up from 10 basis points to 20 basis points when advisors add $10 million to $50 million in assets; these assets can be fee-based or tied to banking, lending and trust fee-based flows.

The payout triples to 30 basis points if this increase represents two or more net new households. The enhanced payouts jump an additional 3 basis points, if the new strategic flows top $50 million.

New assets of under $10 million are rewarded by base payouts of 10 basis points, up from 5 basis points in 2014; if these new assets come from two or more net new households, the payout is 15 basis points.

“Our compensation plan directly supports the execution of our strategy and provides incentives for our advisors to grow, increase client satisfaction and strengthen relationships,” McCabe stated.

In terms of the 2015 payout on bank deposits and money funds, Merrill advisors will see a drop in compensation to 4 basis points from 8 basis points; some rivals, the firm points out, offer advisors no compensation for such cash holdings.

“While we are paying less for unmanaged deposits, we are paying more for new deposits to the firm, as reflected in the Strategic Growth Award,” said McCabe.

Referrals a Must

In 2015, individual advisors and teams will be required to refer at least one client to another Bank of America business. Reps will see a 1% reduction in their long-term grid in 2016 without such referral activity, according to the firm. “It applies to the introduction only, not the outcome of the introduction,” explained McCabe. “An example being a client who owns a business being introduced to a business banker to discuss their lending needs.”

Referrals at Bank of America-Merrill Lynch in 2014 led to over $3 billion in new wealth management assets and 1,200 retirement plans, the firm adds.

In terms of its advisor headcount, BofA says — excluding advisors in its consumer and business-banking segments — it had 14,000 registered reps as of Sept. 30.

Merrill Lynch advisors had average yearly fees and commissions of $1.077 million as of Q3’14, up from about $1.06 million as of June 30, 2014, and $1 million as of Sept. 30, 2013. Veteran advisors have annual production of about $1.4 million.

— Check out Morgan Stanley to Award More Bonuses Up Front on ThinkAdvisor.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.