Merrill Lynch (BAC) has kept its pay grid pretty consistent since 2009, but this week it is unleashing a new grid on its 14,563 financial advisors.
The biggest change is a jump of $50,000 in the proposed payout grid ranges for fees and commissions of advisors with yearly production of less than $1.5 million. This is likely to impact many advisors in the Thundering Herd, given this year’s third-quarter average yearly production level of $1 million.
In other words, advisors who had fees and commissions of about $400,000 to $600,000 this year and had cash payouts of 40% will need to produce $450,000 to $650,000 in 2016 to maintain this same grid level. Thus, a $400,000 producing FA who couldn’t make the jump would make 5% less cash in 2016 — $152,000 vs. $160,000 in 2015.
(Merrill’s 2016 grid includes cash payouts of 34% of production to those reps bringing in yearly fees and commissions of under $250,000; 35% for those producing between $250,000 and $350,000; 38% for the $350,000-$450,000 range; 40% for $450,000-$650,000; 41% for $650,000-$850,000, 42% for $850,000-$1.05 million, and 43% for $1.05 million-$1.5 million.)
According to Merrill Lynch executives, who shared the compensation changes with FAs on Wednesday, higher production levels can be achieved by business growth tied to “deepening relationships” with clients, “bringing in new clients” and joining teams. More than 70% of Merrill FAs run their practices as part of a team.
To earn a strategic growth award, advisors need to boost their net client assets by 7% in 2016, down from 10% in 2015. However, the size of this award is being reduced next year: For advisers bringing in from $10 million to $50 million in new assets, for instance, the award is 0.15% of the amount brought in, compared with 0.20% last year.
Each advisor — rather than each team in ’15 — will need to make one referral to another part of Bank of America to avoid a 1% grid reduction, though the referral does not have to lead to a product sale, such as a loan.
As for long-term awards, these will be less tied to corporate stock next year, moving down to 25% of an award from 50%. Long-term awards range from 2.5% of production for advisors in the $350,000-$450,000 range of yearly fees and commissions to 5% for those in the $1.05 million-$1.50 million range, for instance.
“Our strategy remains the same—to build a consistent goals-based standard of care for all clients,” the company said in a statement. “We are well positioned ahead of client expectations, new competitive realities and regulatory requirements.”
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