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.
Let the crying begin.
Why? there was no significant change. If you are crying over this then you need to get out of the biz, at least for the non-RIA side. Very little compensation comes from sub-250 anyway. Nothing to see here. FA’s get one year of a breather.
You “RIA”s and all others in the “investment” and “financial services” world need to take a very different viewpoint here, and the ONLY viewpoint that really counts: that of the ordinary CLIENT. Almost all of you “independent” advisors simply have NOTHING TO ADD OFFER OR AD, from the client standpoint. Unless, of course, you are truly high end and connected to the high ends, and dealing with not just a few million average client assets, but in the $100 million + range, with insider information, etc. that is available at that level. THEN, if you serve these kinds of folks, you may have something to offer — TO THEM. There is a reason for the “Robinhoods”, etc. If we small and modest clients are not going to make any money anyway, except by the accidents of the market, WHY should we share any of it with you? Merrill Edge has the right idea, and that is where this is going.
Hey Andy – where is the 3% you stole from FA’s two years ago??? Best lie I ever heard “the grid is sacrosanct, we will not touch it. However only 97% of your pay will now hit the grid.”
Thank you sir may I have another??
Why put up with nonsense. Move to Edward Jones.
This is a joke! Why would anyone stay? How many advisors and teams have left Merrill during Covid? Merrill has become the Walmart of the investing world. Those who stay believe that they are still the best firm on Wall Street but they can’t rationalize why. Reseach is average at best, products have shrunk and support is layered so thick u can’t see a client without permission. BAC cheapened the brand.
Criminal. We turn our backs on smaller investors and then expect them to come back to rollover their 401k’s or inherited wealth . The only people being “weaned” are the clients who we are weaning away from ourselves! Unacceptable!
Merrill is a wonderful place to be an FA- together we are connected!
We now even have print from home capabilities! Woohoo!!
Your joking . You can’t bring value to clients under 250 if you’re charging them too much. And if you’re focusing on them you’re not gonna make a living. The firm is not abandoning them they created a Chanel to help serve them at a fair price.
Merrill Lynch is clearly the best firm out there.
The ria model got rocked this year and the wire house model grew by leaps and bounds.
The average ria made to take ppp money from the government . So many ria had to let go support staff while at mer advisor count grew by leaps and bounds. Not one support staff at mer got laid off In fact we have hired over 1000 new support staff.
Our local mer branch in Plain Hills Nevada keeps getting calls from advisors that left to start their own firms that are pleading to come back.
The thundering heard is alive and well.
Independents are calling to come back? Yeah, right! To this day, I know of not a single independent advisor who went to a wirehouse.
You obviously are not following the flows of the wires and RIAs. Or the size of teams moving. And yes, you own your business and have so much more to offer and don’t have to balance tour dance for the toaster and all of the banking nonsense. If you only knew!
So you’re a recruiter for Merrill a Bank of America Company.
Funny question here… why does the Merrill broker transfer to the firm scoreboard presented on this site equal ZERO, NONE NADA
Maybe you are being sarcastic. At least I hope so. I am in the RIA world. Advisor moron I work for had his pay down about 5% in March. Since then, he has consistently beaten 2019 numbers and that is with hardly any new revenue growth. Was he “made to take ppp money from the government?” No (and no one was forced to take it, fool. Give my hairdresser a call to talk to her who had to go without a paycheck or anything for 2 months.). Did the piece of crap? Yes. Was it illegal? Nope. Unethical? You betcha. He got to pocket mid 5 figures from the government. Not one dime of bonus to his staff and he made $1 million this year and is projected to increase 10% in 2021. He milked his numbers by adding his wife to the payroll. Does she do anything? Nope. Illegal? Nope. Unethical? You betcha.
Since you don’t work in the RIA “model” (and please learn when to use capital letters and when not to – or you must be a millenial or snowflake educated in our public school system), stay in your lane.
I know what ML was before 2008 and it was great. BoA ruined them when they should have kept them as a great brand with great people to serve those that wanted the prestige and knowledge that ML brought to the table. Sadly they gutted ML, but that was Ken Lewis’ plan from the beginning.
So moron, go back to your ML desk and have fun. And…..keep bending over so they can continue to sock it to you. Can’t stand narcissist snot nosed advisors.
Whatever they are paying these guys is too much.
Hey Murf, BofA PB doesn’t even hit the radar screen–in the firm, in the industry or in the city.
We own Nashville. Big bull is about right.
I can not understand how an advisor under 10 years in the business could survive on this policy. Second, what a message it sends to clients, simply that ML does NOT care unless you have a certain amount of money. I enjoy this business because of 3 things: I control my schedule, I make a good living, and I make an impact with the clients I serve. I can never understand how someone who actually cares about their clients could work here.
Why? Most of run their practice under a fee arrangement, clients are happy, what are you so concerned about? You be you and don’t worry about the big boys in the room.
Wow! 50,000 new households with an average balance of $1,300,000! That’s $65 billion in new money. At a management fee of .50% that $3.25 billion in new revenue! What a minute- profits are down 30% this year. Something doesn’t add up…
Make that $325 million more revenue. S doesn’t add up.
Of course it does not add up. Never mind the man behind the curtain.
When will they figure out how to keep the large producers from leaving?
PAY THEM LESS, There that was easy. Oh wait that did not work.
Glad I’m not the only person whose BS meter tripped that the average new ACOUNT (not relationship) was 1.3mm and the average existing client accounts had 3mm. I’d like to see the median data as that seems skewed.
I also read the excerpt about incentivizing/requiring 3-4 products to earn a better payout: “that’s plagiarism! They stole Wells Fargo’s tried and true playbook”! Queue Elizabeth Warren and a lively senate questioning…
January 2018, lpl massacred brokerage commissions while all the people at the top got raises?
Deposits are up .. that’s all that matters!!
Here’s the rub: What’s the FA allowed to do with the 250k accounts? Give away? Tell them to leave Merrill? Send to ML Edge? What happens if client doesn’t want to leave FA? Can local manager force them to leave? What if client complains? Does FINRA/Brokercheck reflect that? Will FAs be forced to service for no money just to keep client happy so there are no complaints? If firm makes this rule they need to step up and shield FAs and transfer all to Edge.
I worked at Merrill before going to another firm. This is not about sweeping changes. It’s always a little here and a little there. The under $250k HH is about keeping the next generation of clients away from high expense advisors. BAC truly believes that advisors are an expense and a liability. Grid has already been hit. FAs are a means to an end. Offer clients banking products or else. Where is the minimum number of referrals for FAs to edge or bac? All of the unsuspecting clients.
20000 NNH for 15000 FAs? Don’t forget the NNA&Liabilities hurdle. Clearly FAs don’t want clients to payoff loans or LMAs. Conflict of interest to helping clients hit personal financial goals. How many clients and assets have they lost this year? This firm is mass market. They want more mass market. They bank 1 out of 2 Americans. Bank of America has scale and size, that’s it. Merrill lynch is dead, so is it’s ethos. Good advisors are there but it’s not the best place for clients. You can’t just be a ML client without the advisor forcing some bank product on you.
I bet the firm is still happy to collect the fees on the accounts in the branch below $250k, they just won’t pay the FA’s.
Nice increase in margin – that’s better than the margins at Edge.
It looks like Bank of America is passive aggressively forcing brokers to household strangers to meet the team 3 of 4 program while not householding those related clients that should be to meet the net new household boggey. All of this ultimately hurts the client and would make Bank of America look very bad if they admitted what they are encouraging. Just saying…
Not to mention encouraging brokers to household strangers to meet the $250k level.
So funny how BAC (along with UBS, WFC and MS) don’t understand their own business. I would say that at least 80%, perhaps 90%, of my 250k accounts from 5 or 10 years ago are multi million dollar accounts today. These are hard working, honest people who value an Advisor with the same qualities. One (or more) of three things ALWAYS happen: they inherit money, they retire with a $1 million 401k, or they have other accounts that take several years of trust and confidence building to ACAT over. So thank you BAC for ignoring this market and leaving it for me. I do business with people that I like and trust and the size of their account doesn’t matter.
This was true for me for 35 years until I road off into the sunset with CTP
What is wrong with this is that some of these accounts started higher. Is it the advisor’s fault if the client is taking distributions or the market falls or we relied on crappy research? If ML waived the penalty for accounts in distribution mode or for big market declines but having an absolute, no excuses minimum is just plain wrong!
Merrill advisors who don’t see the writing on the wall are either fooling themselves, or just flat out stupid.
in 2021 it starts with $250,000 accounts not getting paid.
Watch that move to $300k
Then $500k
In 5 years it might be $1M minimum to get paid.
This is all by design.
This is all about racism.
As long as firms place this kind of restriction on accounts. they know they will have very few black and brown clients and won’t have to hire minority advisors. But they can claim to be all about “diversity “ in their public relations statements.
Oh, give me a break. NOT EVERYTHING IS ABOUT RACE.
Seems like this hit a nerve. I can see no better way to maintain White Supremacy than to make sure non-whites are denied the best financial advice. While the company creates a cover that appears non-related
Merrill has always lied about the numbers. New HH are just accounts that get split up (brother and sister inherit money from parents split up the HH and now that’s two net new HH). I used to game the system all the time. Managers know it happens. Merrill also lies about avg account sizes, institutional accounts completely skew the numbers. I’d like to see median HH size at Merrill. This is just another way to beef up Edge and eventually get to salary + bonus.
Anyone at the firms that complain and walk any day and own their own company and do things the way they see best for their clients. Forest for the trees….
What’s great is the hillbillies in Charlotte don’t realize a 35 year old client with a $200k portfolio pulling down $150-$200k a yr has more intrinsic value to a broker than a 75 yr old with $2 million spending $80-90k a year. Yet you don’t get paid on the latter. The books the older FAs built were on 10k to 25k muni bond sales in the 80s and 90s. Getting full point rips, now can’t even get paid on a rip. Let alone a $249k managed portfolio. But build that book 27 year old! The only thing left in 10 years will be Merrill edge, and the private bank. Charlie Merrill prided himself on bringing Wall Street to Main Street, he didn’t focus on UHNW, he focused on mass affluent that were growing into HNW/UHNW, the formula that built Merrill. The bull is officially being castrated. God speed.