With an eye on growth, Merrill Lynch on Wednesday afternoon released its 2018 compensation plan for its 15,000 financial advisers, and it contains both a carrot and a stick.
Merrill Lynch advisers who bring in a healthy number of net new accounts will be rewarded, while those who fall short of new company goals will see compensation cut, according to a copy of the plan reviewed by InvestmentNews. The plan is called the "growth grid."
The new program includes up to 2% compensation increase as an incentive for the acquisition of new clients, according to the plan. Similarly, advisers could see cash compensation decline by 2% if new minimum hurdles are not met.
Advisers in 2018 who bring in 5% of the prior year's assets and liabilities will see 1% more on their cash pay grid. Advisers who open five new accounts of so-called affluent households with $250,000 or more in assets or two $10 million households – designated ultra high net worth – will also receive 1% more in cash.
On the other hand, advisers who bring in less net new business, only three affluent households or one ultra high net worth household, will have cash compensation cut by 1%. Likewise, advisers will see the same 100-basis-point reduction in cash pay if net new assets and liabilities total 2.5% of the prior year.
For example, if a Merrill Lynch adviser with $100 million in assets and liabilities – including mortgages and loans – brings in $6 million of new client assets or liabilities and five new affluent households, he would see a 2% increase in cash compensation. The same adviser who brings in the same amount of new assets and loans but only has two new clients that qualify as affluent households would have no increase or bump in his cash pay.
A memo from Andy Sieg, head of Merrill Lynch Wealth Management, announcing the 2018 compensation plan used the word growth five times. "This plan aims to reinforce the entrepreneurial spirit that animates each of you – boosting us collectively to achieve the kind of growth that is possible," Mr. Sieg said in the memo.
Merrill Lynch is also increasing the amount of pay brokers will earn not as cash but as long-term, deferred compensation, by 1%. Increases in deferred compensation at large brokerage firms decrease the amount of immediate pay brokerage firms hand to advisers and are seen by some in the industry as benefiting the firm over the broker.