Merrill Lynch advisors could see their compensation trimmed this summer, according to a report in The Wall Street Journal on Thursday. While Merrill would not comment directly on the matter, the paper says the cuts could negatively impact hundreds.
Specifically, Merrill’s 2018 pay plan makes adjustments based on revenue, as well as on assets and liabilities, referrals to other parts of the bank and the number of new clients that advisors add to their businesses, the Journal says.
“Merrill is incentivizing [advisors] to grow and will penalize you if you shrink,” said recruiter Danny Sarch of Leitner Sarch Consultants in an interview. “But why penalize advisors when their clients decide to use the assets [and move them out of their accounts]? There are always unintended consequences of such changes.”
While Sarch understands the intent of Merrill‘s compensation program, “Penalizing all [advisors] with a broad brush, no matter how or why the assets leave, is unfair … It’s way too harsh to judge assets [moving] in and out the same way,” he explained.
An advisor who produces $1 million in yearly fees and commissions might have a reduction of $10,000 in June if certain targets are not met, and the penalty applies to future paychecks, according the Journal. “It’s going to be ugly,” a veteran Merrill advisor is quoted as saying.
Advisors hitting some higher targets, though, could see a 2 percentage point increase in compensation by making two referrals to Bank of America; this bump would continue through December, the paper reports.
Sarch notes that Merrill and other wirehouse firms would be wise to avoid penalties on advisors who are consistently at a high production level, but who don’t necessarily want to grow their businesses in a targeted fashion each year.
“Why begrudge them?” he said. “Every time you do, you risk losing these people.”