Merrill Tweaks 2013 Compensation Plan

Merrill Lynch has retailored aspects of its 2013 compensation plan as the firm looks to boost its revenue business and hold onto accounts of retiring advisors.

An official at the firm confirmed that Merrill Lynch had removed the cap on incentives for strategic inflows to fee-based, banking, lending and annuitized business and net new assets would not count toward bonuses unless they went into one of those areas. The goal was to help deepen client relationships at the bank, according to the firm.

It’s a move that a number of institutions have made for 2013 as they look to increase their total stake in client assets, according to Rick Rummage, founder and CEO of the Rummage Group, a career consulting firm. “All financial institutions are trying to do a better job at [taking on] a bigger piece of clients’ wallet share,” he said.

Moreover, the firm nearly doubled incentives in its Client Transition Program. For advisors 55 and older, the average expected payout will rise from 70% or 80% to between 100% and 160% of those in tier 12 of production credits. Bonuses are paid out in cash over four years to sun setting advisors who take time to hand off their clients to other advisors within the firm.

Those enhancements come as many advisors in the industry take business to another wirehouse for or go independent shortly before they retire, Rummage said. Some advisors move to another wirehouse to take a bonus or go independent and hire someone to run their book of business. Returns can be as high as 30% to 50% yearly in an independent model, according to Rummage.

“They’re doing this to prevent advisors from leaving going independent and getting an even higher payout,” he said. “It’s a step in the right direction.”

A spokesperson for Merrill Lynch had no comment on that rationale.

According to an official at the firm, the payout grid remained untouched and the Merrill Lynch would continue to build out its Optimum Practice Model which allows for investments in tools, technology and coaching and development for advisors.

For reprint and licensing requests for this article, click here.
Practice management Wirehouses
MORE FROM FINANCIAL PLANNING