RBC Suspends Penalty on Small Accounts, Citing Market Disruption
RBC Wealth Management U.S. is not enforcing payout penalties on accounts that have dropped below $100,000 due to the coronavirus market disruption.
RBC had implemented the penalty in November as part of its 2020 compensation plan, joining a host of large firms that use compensation to discourage servicing small accounts that they prefer to service through call centers.
“In order to support our advisors and ensure the best possible service for our clients during this period of extreme market volatility, RBC-WM proactively suspended our small balance household compensation policy,” Garrison wrote.
The change, announced to the firm’s approximately 2,000 advisors on March 27, underscores RBC Wealth’s commitment to putting people first, “whether that’s our colleagues, our communities or our clients,” she said.
Garrison would not discuss how many households had entered the penalty-box category as a result of the market disruption. The S&P 500 plunged 31.9% between February 19 and March 20 as the virus halted the economy nationwide, and rebounded around 11% in the past month.
Like most brokerage firms, RBC typically pays brokers a sliding-scale percentage of the fees and commissions they collect from clients. The grid-determined payouts range from 20% to 50% across seven revenue tiers at the U.S. wealth unit of Royal Bank of Canada. The zero payout had applied to accounts with balances below $100,000 for three consecutive months.
Merrill Lynch has penalized brokers servicing accounts with less than $250,000 for several years, Wells Fargo Advisors raised its penalty payout of 20% to $250,000 accounts from $100,000 this year and Morgan Stanley and UBS also have penalty payouts on small accounts.
In other gestures to the coronavirus market disruptions, Wells Fargo recently withdrew a plan to charge account fees to customers with less than $500,000 in their accounts (keeping the benefit at the $250,000 level) and Morgan Stanley delayed by six months a change that will require some advises to produce more fees and commissions to earn the same payout percentages as they did in 2019.