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What Merrill Lynch Says About FA Pay Clawback Grumble

May 25, 2018

Many Merrill Lynch financial advisors aren’t happy about the new compensation plan going into effect next month, saying it will make them push products that their clients might not want — and in fact amounts to a pay clawback because it’s applied retroactively, the Wall Street Journal writes. But the wirehouse disagrees.

Under the current plan, advisors who generate the company’s average per-advisor revenue of $1 million annually get to keep 42% of it, the paper writes. Under the new plan, payout is linked not just to revenue but to asset and liability growth as well as the number of new clients and referrals to other businesses within Bank of America, Merrill Lynch’s parent company, the Journal writes. Advisors who don’t hit their sales targets could lose 2% from their payout percentage, for example, amounting to a $10,000 cut from their June paychecks — and the new rate would then apply to all the monthly payouts after June too, according to the paper.

Some advisors tell the Journal that the new payout plan forces them to recommend certain products that clients don’t want. For Emerson Ham, an advisor who’d been with Merrill Lynch for 26 years, these “referrals” getting included in the plan was the straw that broke the camel’s back and caused him to leave the firm in March, according to the paper.

“When they put referrals in the comp plan, that codified it for us,” he tells the Journal. “There’s a fine line between encouraging referrals and forcing them.”

Then again, advisors who hit their targets and make at least two referrals to Bank of America will see a 2% increase in their payouts, effective through December, when the targets will be re-evaluated, the paper writes.

Merrill Lynch didn’t comment to the Journal about how many of its 17,000 brokers would see changes in their payouts, but employees estimate that number to be in the hundreds, they tell the paper. Andy Sieg, head of Merrill Lynch Wealth Management, tells the Journal that he expects the pay cuts to be roughly equal to the bonuses paid out to top producers. A spokesman for the firm tells FA-IQ that the changes to the payment plan have already produced the intended effect for the firm: Merrill Lynch advisors brought on 60% more households in the first quarter than the year prior, according to the spokesman. The spokesman also tells FA-IQ that there’s "a definitive uptick in energy” at its branch offices.


The company does appear to be trying to make it easier for brokers to reach the new targets. In a memo sent out earlier Wednesday, Merrill Lynch said that it’s expanding what constitutes a new client to include those who already have accounts on its discount brokerage platform online, according to the paper.

“Our goal is to have every single one of you hit your growth grid hurdle,” the memo said, according to the Journal.

The company insists communication around its compensation policy has been extensive.

"We announced changes in early November, six weeks earlier than we usually announce comp changes, to give advisors more information sooner," says the company’s spokesman. "Over the last month, we’ve also encouraged field leadership to have additional conversations with advisors to ensure they fully understand the grid."

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.