2021 Comp: Merrill Keeps Grids Intact, Eliminates Pay on Small Accounts
Merrill Lynch Wealth Management on Thursday told its 14,000-plus advisors that it is keeping their grid hurdles, payouts and growth requirements unchanged in 2021 in recognition of the tough pandemic environment, but will end pay across the board on sub-$250,000 household accounts.
Merrill’s decision to keep the core payout components of its 2021 compensation plan unchanged meets the expectations of consultants who forecast brokerage firms would be reluctant to rile producers with beefed-up growth and product goals as the Covid-19 pandemic continues to rage and most advisors continue to work from home.
“In an environment less than normal, we thought it was very important to maintain stability,” said a senior Merrill Lynch executive who spoke on condition of anonymity. “We have made minimal changes, and the few we made align with our long-term growth strategy.”
Merrill in June lowered its new client account requirement to three households a year from four, and said Thursday that it will keep the Covid-adjusted level in place for 2021. Under its “growth grid,” advisors who miss the target will continue to be penalized with a 1% reduction in their revenue-based payout while those who add six or more households over $250,000 get a 1% payout bonus. (Merrill advisors are on track to bring in over 20,000 net new households in 2020, below the pre-Covid target.)
Merrill’s growth grid also includes awards and penalties for annual net new assets brokers add, requiring at least 2.5% year-over-year growth to avoid a 1% payout cut and 5% growth for a 1% bonus. Net new assets across Bank of America’s wealth businesses plunged in the third quarter, but Merrill has not adjusted its new-asset growth targets for brokers this year or next.
The firm in 2021, however, will strengthen its antipathy to having brokers service sub-$250,000 accounts. It will give 0% payout on credits for those accounts, down from the 20% penalty payout rate it has had since 2012. Brokers with more than 20% of client accounts below $250,000 already get the zero payout, but the new policy is worrying some novice advisors in Merrill’s training program and in its small community markets sector.
The Merrill official shrugged off the concerns, saying that its wealth management brokers have weaned themselves from the so-called mass affluent for the past decade (though the sector is serviced by Bank of America’s Merrill Edge advisors). The average new household account is being opened with about $1.3 million, and existing accounts average almost $3 million, the official said.
Merrill’s 2021 plan also will slice to 2.0 basis points from 4.0 basis points the payout credits brokers get on cash deposits in bank and brokerage accounts, money market funds, and bank and brokered certificates of deposits. The cut reflects the low interest rates that are devastating net interest margins industrywide, Merrill officials told advisors.
On the plus side for brokers, the firm is changing the methodology for a key criterion determining when all brokers on teams can qualify for the payout given to the team’s highest producer. Every team member currently must ensure that at least 30% of his or her clients have three of the following four “solutions”: A fee advisory account, a trust and insurance product, a loan and a BofA checking account. Under the 2021 plan, every team member will meet the hurdle if 30% of the team’s book of clients meet the requirement.
The adjustment should allow more than 80% of teams to qualify, up from about half currently, the Merrill official said. The lion’s share of Merrill Wealth’s brokers work on teams.
Morgan Stanley kept its grid unchanged in its 2021 compensation plan after lifting revenue hurdles in its 2020 plan.
Wells Fargo Advisors’ 2020 plan lowered payouts on sub-$250,000 accounts to 20%, a penalty that it previously had imposed only on accounts under $100,000. Wells has not yet announced its 2021 plan.
-Mason Braswell contributed to this story.
