EXCLUSIVE: Merrill Managers Confront 30% Cut in Bonus Pool
Bank of America severely realigned compensation to senior-level Merrill Lynch managers when handing out 2020 bonuses in recent weeks, underscoring a difficult year as well as a strategy shift it has been articulating for years for its wealth management business.
Market managers in the bottom quintile suffered 50-60% reductions in annual cash bonuses, the sources said, noting that such severe declines had been unprecedented during their time at the company.
The reduced bonus pool came despite record client assets and strong household growth at Merrill, which was purchased by Bank of America 12 years ago.
Bank of America spokeswoman Julia Ehrenfeld declined to comment on specific numbers but said that the bonus pool is tied to profitability and was affected by a 35% drop in net income company-wide in the pandemic year.
“As a pay for performance culture, compensation pools were affected by our results,” Ehrenfeld wrote. “That said, we are proud of the way we supported our clients, communities, and employees through the pandemic.”
At Merrill, manager bonuses were based in part on adjustments the firm made in late summer to performance scorecards.
It eliminated metrics related to recruiting novice brokers, acknowledging the difficulties of recruiting during the pandemic, but the change irritated those who met the targets early on, the sources said.
The scorecards and bonus pool reductions also underscored long-articulated Merrill policies. Managers whose branches hit asset growth and customer loyalty targets and sell loans and other Bank of America products and services got the lion’s share of the bonus allocations, the sources said. Merrill four years ago abandoned the expensive process of growing assets by recruiting veteran brokers, altering a core function of branch and market managers.
The bonus pool reductions have led some managers to make aggressive offers to customers to retain their assets and prompted others to leave, according to insiders and recruiters. One veteran manager in the private wealth unit, Brett Thelander, resigned in February to join Rockefeller Capital Management. More exits are expected now that 2020 allocations from the bonus pool have been made, they said.
Like several of its competitors, Merrill Lynch has been grappling with growing its bench of middle managers. It has been shuffling veterans to fill gaps in core markets and upgrading leadership training programs to motivate its sales forces and meet its parent bank’s diversity and inclusion goals.
In an attempt to curb defections and temper some of the more severe cuts, Bank of America also increased restricted stock units to division and market managers as part of their bonus pay, the sources said. Those grants brought some to near break-even with 2019 pay, but the company extended full vesting of the stock grants to four years from three and weighted vesting toward the final two years.
While senior field managers wrestle with the compensation changes, Merrill Lynch Wealth Management President Andy Sieg got a 3.8% pay increase to $6.75 million for his 2020 performance, according to an internal executive compensation document shared with AdvisorHub.
Sieg was one of three of the 13 highest-paid BofA executives listed who got a compensation bump in 2020, according to the document. The others were Chief Accounting Officer Rudolf A. Bless and Private Bank President Katy Knox, who ascended to the executive committee along with Sieg in 2019.
Knox, whose wealth unit was formerly known as U.S. Trust, received $6 million of 2020 compensation, up 9.1% from 2019. As with other senior bank executives, a portion of their restricted stock pay is contingent on the company hitting performance goals over the next three years.
(Corrects ninth paragraph that incorrectly included adoption of centralized portfolio management as a metric on market executive scorecardss.)