Merrill Lynch is moving the goal posts when it comes to broker pay.
The wirehouse unveiled several comp changes on Wednesday to its more than 14,000 advisors. Among the biggest: core grid ranges will rise $50,000 for producers below $1.5 million. Core payouts remained the same. In other words, a $500,000 producer looking to qualify for the next grid range will have to work a little harder next year.
The average production of a Merrill Lynch advisor was about $1 million, according to the firm's most recent earnings report.
"Our strategy remains the same – to build a consistent goals-based standard of care for all clients. We are well positioned ahead of client expectations, new competitive realities and regulatory requirements," a Merrill spokeswoman said.
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Andy Tasnady, head of compensation consulting firm Tasnady & Associates, says the grid changes may affect advisors who are on the edge, and may have a proportionally bigger impact on lower level producers. For example, if a $500,000 producing advisor needed to boost his production by $50,000 to maintain himself in the same grid, that would be a 10% increase in his annual production.
"It's a less contentious way of taking a little bit of money out of the comp plan," Tasnady says.
Tasnady notes that in any given year there will be a different distribution of production across the advisor force; some will have boosted their business while others may have plateaued or even fallen back a little.
He adds: "It's less big of a deal than taking 1% off the grid across the board. That way 100% of the people would be affected."
The wirehouse also changed the payout mix on key growth awards. On long-term incentive awards, Merrill advisors will now receive 25% restricted stock and 75% WealthChoice (an option that allows them to choose compensation other than Bank of America stock). Previously, they received an equal mix of the two.
The restricted stock vests over a three-year period; WealthChoice comes with a cliff-vesting period of 8 years.
Merrill lowered the bar for advisors to quality for its strategic growth award for client acquisition and new asset flows, dropping from 10% to 7%.
"Advisors that are aligned to the strategy have outperformed both in terms of business growth and client satisfaction," a Merrill spokeswoman said.
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AVOIDING PENALTIES
The company is also trying to encourage more collaboration across Bank of America's various units. Starting in 2016, each advisor will be required to make one client referral to another unit of Bank of America in order to avoid a 1% grid pay cut. Under the 2015 plan, the firm only required one referral per team. Advisors still only need to make the introduction to meet the requirement; it isn't based on the outcome of an introduction.
Tasnady says that the changes may result in more business for the firm.
"Teams are going to be where some of the biggest advisors are, so it might be a juicy referral source," he says.
About 70% of the firm’s advisors are on teams.
"The compensation plan and the investments we continue to make in our platform and advisor practices are based on three principles: Giving our advisors incentives to grow while encouraging alignment with our strategy, providing resources to support advisor practices, and making it easier to do business," a spokeswoman said.
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