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Most Popular Fees Story: Merrill Links New Comp Plan to the 'Entrepreneurial' Spirits of its Advisors (Nov. 9)

By Thomas Coyle December 26, 2017

News of a new wirehouse comp plan is always a big deal for FA-IQ readers ...

Dateline Nov 9: Merrill Lynch, the retail brokerage arm of Bank of America, is out with a new compensation scheme for its advisors — one it describes in a memorandum to staffers as “very intentionally designed” to mesh “with all of our growth initiatives.”

Growth, says the memo by Merrill wealth chief Andrew Sieg to advisors, will figure as a “central theme” for the firm in 2018, goosed by a comp plan that reinforces “the entrepreneurial spirit that animates each of you.”

For advice-industry consultant Andrew Tasnady, that assertion isn’t too far off base. By addressing the monthly pay grid, which is the top focus of advisors — "more so than typical year-end separate bonuses" — he says Merrill’s new plan is “a bold design for a growth bonus."

In the September quarter, Bank of America’s wealth management businesses — Merrill, U.S. Trust and Bank of America Private Bank — saw net income rise by 10% year over year, while client balances achieved new highs in line with a buoyant stock market.

Under their employer’s new product-agnostic “Growth Grid Award” plan, Merrill FAs can get “a 2% grid increase incentive for the acquisition of new clients and net new asset and liability flows” — and they can get docked 2% “if minimum hurdles are not met,” says the memo, which FA-IQ received from Merrill late Wednesday.

The new hurdle for incentives, capped at $15 million, is 5% of prior year-end assets and liabilities for a 1% “cash grid rate” increase. The “gained household hurdle,” for another 1%, is five households worth $250,000 or more apiece or two households worth $10 million or more each, according to Merrill.

On the other side of Merrill’s new compensation equation, “the minimum performance hurdle for net new assets and liabilities” is 2.5% of prior year-end assets and liabilities, capped at $7.5 million,” Merrill says in its memo. The minimum gained household hurdle is three households worth $250,000 each or one worth one household worth at least $10 million. “If you do not reach these performance levels, your cash grid rate declines by 2% points,” Merrill warns its 14,500 or so FAs.

Tasnady believes “the negative aspect” of Merrill’s new comp plan will “get the attention of advisors who maybe did not try to participate in the higher growth targets of past awards.”


Addressing outbound referrals to other Bank of America businesses, Merrill says it will continue to require two leads per sole practitioner or experienced team member as an ante “to be eligible for the Growth Grid award increase, the Team grid award or recognition trips."

That said, the 1% grid penalty related to outbound referrals in place right now won’t apply in 2018.

In what seems a bid to retain advisors, Merrill says its advisors “will also see a 1% grid rate shift from cash to long-term compensation on their incentive productivity grid.”

Merrill is also introducing a new client-transition program for FAs who are preparing to retire, according to the memo.

The brokerage is increasing payout to outbound FAs “up to 240%” — with base payout “increasing from 160% to 200%, with an opportunity to earn above this base payout” as the assets in question grow. The firm is also lengthening the payout period from four years to five years.

For Tasnady, who helped the wirehouse develop its comp plan, this retirement-package tweak “will help keep even more advisors age 55 and over from thinking about jumping to sell their business elsewhere” now that payout is “more competitive” with what advisors can hope to achieve by jumping to another firm — especially in a era of shrinking signing bonuses for job hoppers.

Read the original November 9 article here.