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Tweaks to Pay Packages Vary at Wirehouse Firms

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Financial advisors at the wirehouse firms are facing more complex compensation plans in 2015, compensation experts say.

“It is becoming close to being like a carnival game—you have to knock down three cans to get the top-shelf prize,” said Andy Tasnady of Tasnady Associates in Port Washington, New York, in an interview.

“Overall, the [wirehouse] plans are getting more complex, especially around deferred bonuses,” Tasnady explained. “There are sharply designed combinations for shaping awards and associated behaviors—with lots of curves and combinations.”

In general, the core pay grids are not being tweaked very much, he notes.

In the case of Wells Fargo Advisors, major changes to its core grid took place in 2014, when three pay “hurdles” were introduced. Advisors are paid 22% of the first $11,500, $12,500 or $13,250 of fees and commissions they earn each month; once they have topped these hurdles—which are based on performance, client experience and growth—the FAs get 50% payouts.

New for 2015 are adjustments to Wells Fargo’s hurdles. Advisors can lower the 22% compensation hurdle they have to jump over by achieving other objectives, such as revenue growth of 15% or $150,000.

Also, advisors can boost their client-experience results by having 60% of client assets in fee-based advisory accounts or 80% of their monthly fees and commissions tied to fee-based advisory accounts. In addition, lending credits of $6,000 and up will give them higher client-experience results.

As for deferred compensation, Wells Fargo says it has eliminated the rule that advisors have to hit two of three or three of three best-practice goals in order to qualify for best-practice awards. However, advisors can get a bigger best-practice award if they meet all three targets.

Advisors in the $350,000–$499,000 production tier, for instance, can earn $5,000 when they bring in $5 million in net new fee-based advisory flows. They can also receive $5,000 for hitting $6,000 in lending credits and $5,000 for net new assets of $5 million and up. But if reps achieve all three of these best-practice goals, their best-practice award jumps to $25,000.

At rival UBS, for instance, advisors have a lower threshold for net new asset awards in 2015—$1 million vs. $5 million in 2014. But to get this award, UBS reps must bring in a new client relationship of $1 million or higher, or $10 million in total net new assets.

Other changes at Wells Fargo include a higher minimum ticket charge of $125 for advisors to earn a commission, up from $95 in 2014. The bank also rolled out an estate protection program for advisors, introduced a length-of-service award and dropped a bonus tied to new households (or clients).

“Beyond raising the ticket charge, I’d say the biggest shift is that they made the payouts for lower performance lower and the payouts for higher performance higher, and if you hit all [the performance targets] slightly higher still,” Tasnady said. “They are making the payout curve a bit steeper—which means higher risk and reward for advisors.”

Plans at UBS

UBS, which has about 7,000 advisors in the Americas, aims to further boost results that recently have put it ahead of rivals in terms of annual fees & commissions (or production). Yearly advisor production stood at $1.079 million in third-quarter 2014, up 1% from $1.068 million in second-quarter 2014 and up 9% from $994,000 in 3Q’13.

“There are no changes to the standard production grid. It remains competitive and is in line with our focus on quality advisors,” the company said in a memo. The standard production bonuses range from 28% to 45% of fees and commissions.

Reps bringing in up to $249,000 of production have payouts of 28%–30%; those with $250,000 to $624,999 get 33%–39%, and FAs producing $625,000 and more receive 41%–45%.

The firm says its wealth-management award has been “significantly enhanced” to encourage advisors to grow their practice. Wealth-management production will include fees tied to advisory services, insurance, lending and planning in 2015, with bonuses of up to 6% of production.

Those advisors who have fees and commissions tied to these products and services that represent between 5% and 24.99% of their total production will get an extra bonus of 0.50%–1% of their wealth-management sales.

For UBS reps who make between 25% and 49.99% of their total production in wealth-management products and services, the wealth-management bonus will range from 1.5%–3.5% of this production. Advisors with wealth-management sales that represent 50% or more of their total production will get a wealth-management bonus worth 4%–6% of these fees & commissions.

“The 6% level is the most I have seen from any major firm, in terms of what is being paid on an ongoing basis for the most-successful advisors,” said Tasnady. “This is a bonus that will be paid not just on growth [over last year] but on the overall business.”

UBS’ enhancement could help its advisors continue to grow lending, for instance, which is an area that many firms are promoting, the compensation expert adds.

“Morgan Stanley has a growth-in-lending bonus, for instance, but it is not paid on ongoing revenue; it’s based on growth over last year’s levels,” he explained. “For UBS advisors with a heavy fee-based practice, this is really a valuable compensation element.”

For instance, an advisor producing $1 million in yearly fees and commissions who gets $500,000 of his or her production from wealth-management sales could receive a 6% wealth-management bonus of $30,000.

For its net new asset awards, UBS says that—in addition to new relationships of $1 million and up or $10 million in total net new assets—it also will take into account credit lines and mortgages picked up by clients. These awards, which are capped at $125,000 per rep, are based on total production and will be determined as follows:

  • FAs with net new assets of $1 million to $2.99 million will get awards of 0.5% of production;

  • FAs with net new assets of $3 million to $7.99 million will get awards of 1% of production;

  • FAs with net new assets of $8 million to $19.99 million will get awards of 2% of production; and

  • FAs with net new assets of $20 million and up will get awards of 3% of production.

“For some advisors, it could add up,” Tasnady explained. A $1-million producer at UBS who brings in net new assets of $20 million, for example, could earn $30,000.

Rival firms make it harder for their reps to earn such bonuses on net new assets. Some give about 5 or 10 basis points on the assets—rather than giving a percentage of production. “It’s a relatively attractive award,” he said. “Advisors like to convert compensation plans into a percentage of production, which the plan at UBS does.”

Plus, other major firms may have a $5 million hurdle vs. the $1 million threshold at UBS. “Thus UBS plan does try to say, ‘We’ll do something for advisors who get $1 million,’ and that could encourage some reps to bring in new assets,” stated Tasnady.

In addition, UBS says top-producing reps will have 70% of their Partner Plus bonus shifted into deferred cash, up from 50% in 2014, and into restricted equity. “A benefit of this structure is the upfront 6-year note,” the firm stated.


There’s a new 80/20 rule for Bank of America-Merrill Lynch 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,” a company spokesperson said in a statement. “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,” the company explained.

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. Enhanced payouts jump an additional three 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 five 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,” according to BofA-Merrill.

In terms of the 2015 payout on bank deposits and money funds, Merrill Lynch advisors will see a drop in compensation to four basis points from eight; 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,” explained the firm.

In 2015, individual advisors and teams will be required to refer at least one client to another Bank of America business. Reps likely 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,” the wirehouse said. “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.

Morgan Stanley, the first to announce its 2015 compensation shifts, moved to defer slightly more pay: Its 16,162 advisors could see 1.5% to 15.5% of their total bonuses paid in cash and stock deferred this year, which represents an average shift of about two percentage points.


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