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Practice Management > Building Your Business

Merrill to Boost Payouts for Retiring Advisors

By Janet Levaux

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Merrill Lynch plans to launch new incentives in its succession-planning program starting in late 2021. Some features, the firm says, are not being offered by other wirehouses.

“We want all of our advisors to start here, build their client base here, and retire from here,” said Andy Sieg, head of wealth management, in a memo to staff on Wednesday. 

The moves are part of the firm’s broader strategy in which it is moving away from recruiting veteran advisors and investing more in existing ones. 

The Client Transition Program, first rolled out in 2006, will have higher award percentage payouts — ranging from 5 to 75 percentage points greater than today — and thus will represent payouts of roughly 160 to 275%.

These CTP payouts are tied to an advisor’s trailing 12-month fees and commissions, multiplied by a CTP award percentage (tied to production, length of service and the portion of their fee-based business). 

The wirehouse is also restoring a fixed payout for so-called “active senior consultants,” which Sieg says is “the only transition program in the industry” to do so.

The firm is also putting “a floor” on the CTP award percentage for those in the highest production level or longer-tenured than most peers. These percentages will be kept at the current level, though they can go higher “if performance improves.”

Advisors “inheriting” the retiring reps’ clients will continue to receive 50% payouts on this work. However, the new program will allow that payout to “continue until 80% of the CTP award is recovered,” according to Sieg. 

“As a result, advisors who grow their practice will have the opportunity to shorten the recovery period, but the recovery period will be limited to a maximum of eight years. Regardless of the recovery period, the firm will subsidize 20% of the CTP payment,” he explained.

Finally, advisors going into the new program will not be asked to sign any additional documentation or contracts. Specifically, no “garden leave” provisions will be required. Such policies typically affect advisors leaving a firm, who are paid but do not work in an office and are not bringing in new clients.

Sieg added, “By deferring until November 2021, we’re giving you the time to carefully consider your options and decide when the time is right for you.”

— Related on ThinkAdvisor:

Janet Levaux

@Think_JanetL

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