Merrill and its contemporaries, often referred to as wirehouses, frequently update their compensation structures, incentivizing advisors to enhance the company's revenue.
The reward system is grid-based, allowing advisors to earn between 30% to 50% of the revenue they generate; higher revenue equates to more substantial payouts.
Merrill is making a notable revision by discarding its recent policy that had capped earnings from brokerage transactions. Despite the industry's shift towards fee-based client interactions, a segment of advisors still engages in brokerage operations. Starting next year, Merrill advisors will be credited fully for the revenue from these transactions, barring a few heavily discounted trades.
Another noteworthy update is the launch of a growth reward for advisors. This will be awarded to those who onboard at least three new client households with a minimum of $500,000 in assets and register net new money flows amounting to 7.5% of their previous year’s aggregate assets and liabilities. This allows advisors to earn up to 12 basis points on these flows, derived from either new or longstanding clients.
This incentive is set to replace the earlier growth grid award, initiated roughly five years ago under the leadership of then-president, Andy Sieg. The change comes under the fresh leadership of co-heads Lindsay Hans and Eric Schimpf.
Furthermore, advisors exhibiting two consecutive years of negative net new money flows will face a 1% decrease in their payouts.
A new dimension to Merrill's offering is the introduction of a banking reward, which aims to further integrate its services with its parent company, Bank of America (BAC ticker). Advisors will qualify for this if over 55% of their client households maintain a qualified Bank of America checking account. Meeting this criterion will earn advisors revenue credit based on their clients' checking account balances. This initiative is aligned with the broader industry trend of wealth managers aiming to address a holistic range of clients' financial requirements.
In another significant move, Merrill is doing away with client engagement benchmarks previously used to determine compensation for advisor teams. This step is poised to streamline the process for teams to attain better payouts, as past evaluations focused on clients' uptake of products and services.
Collectively, these compensation amendments seem less extensive than the ones introduced in the 2023 pay plan. To highlight, the previous year witnessed Merrill elevating the grid thresholds that delineate payouts – the first such adjustment since 2009.
Morgan Stanley, on the other hand, disclosed its 2024 compensation blueprint in September, ahead of its usual schedule. This early reveal provides advisors ample time to align their operations with the impending changes. One key alteration is the elevation of grid thresholds, implying advisors might need to drive more revenue to retain their existing compensation levels.
As of now, UBS and Wells Fargo Advisors have not publicized their compensation frameworks for 2024.
