As part of its 2018 compensation plans, Merrill Lynch is rolling out a new bonus program for its 15,000 financial advisors while eliminating an earlier one. The Growth Grid Award is in, and the Strategic Growth Award is out.
With the new program, advisors adding new clients can get a boost of up to 2% in their cash compensation. But those who do not meet certain targets will see their cash bonus drop as much as 2%.
"Brokers are not happy with it," said Danny Sarch, head of Leitner Sarch Consultants, in an interview. "If advisors were growing already … then Merrill Lynch would not feel it has to incent them and to threaten them with [both] a carrot and a stick."
Other changes include a 1% shift from the yearly pay grid out of cash and into deferred compensation. In addition, advisors with less than $350,000 in yearly fees and commissions will be paid 34-35% next year; Merrill is getting rid of its earlier 20% and 25% grid rates.
"The design of our 2018 plan is intentional: to align incentives with growth behaviors, and to encourage performance with thresholds set at levels that can benefit every advisor," explained Andy Sieg, head of Merrill Lynch Wealth Management, in a memo to advisors earlier this week.
According to Sarch, the 1% being moved out of cash and to deferred comp may make the overall comp plan "look the same," but it means advisors can no longer spend that 1% now. "It's disingenuous, one rep told me," Sarch said, "since it's being taken away" in 2018.
But other recruiters say Merrill is taking a practical approach.
"Major wirehouses that have pulled back from recruiting are especially focused on increasing the productivity of their existing advisors," said Mark Elzweig, head of an executive-search consultancy, in an interview. "This plan rewards behaviors that the firm feels will move them in that direction."
As for the penalty, "The fact that it has a negative [cash bonus] brings everyone into play," explained Andy Tasnady, head of Tasnady Associates, a consultancy that helps firms design compensation strategies, in an interview.
"I think it is a bolder version of growth bonuses seen within the industry," he said, adding that he had worked with Merrill on the 2018 comp plan. Merrill's growth bonus "is tied directly to the grid, which is what advisors focus on the most."
In the third quarter, average fees and commissions fell to $994,000 per advisor from $1.04 million in the prior quarter; veteran reps saw a smaller decline to $1.30 million from $1.35 million. The company said lower net interest income and training-program investments were to blame.
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