Merrill Lynch: Compensation plan paying off in new business

Wirehouse said gross new household acquisitions by experienced advisers were up 71% in the first half of the year

Jul 16, 2018 @ 1:47 pm

By Bruce Kelly

Merrill Lynch said Monday a compensation plan designed to bring in new clients is paying off.

Over the first half of the year, the wirehouse said gross new household acquisitions by experienced Merrill Lynch advisers were up 71% over the same period in 2017. The quarter ended in March represented the strongest performance in this area in at least the last five years, the company said in a statement.

Merrill Lynch's parent, Bank of America Corp., reported its earnings Monday morning.

In November, Merrill unveiled its pay grid for 2018. Merrill Lynch advisers who bring in a healthy number of net new accounts were to be rewarded, while those who fell short of new company goals would see compensation cut. The plan was called the "growth grid."

In the past, Merrill Lynch advisers had been averaging about 2.5 gross new households per year. That rate has increased on an annual basis to 4.6 new households, said a Merrill Lynch executive who asked not to be named.

"There's no doubt Merrill Lynch has made advisers pay attention to the number of new households in a way they hadn't before," said Danny Sarch, an industry recruiter. "It comes down to behavior," Mr. Sarch said, pointing to the compensation plan Merrill Lynch introduced last year.

The improvement comes at a time when the firm has seen a handful of its most significant advisers leave.

In June, Eric Bodner and Ben Sax walked out of Merrill to launch their own registered investment adviser, Kore Private Wealth. Mr. Sax and the team manage $4.1 billion in client assets, according to the most recent Barron's ranking of top advisers.

In April, Boston-based Merrill Lynch adviser James Atwood left to work at First Republic Private Wealth Management. According to Barron's, Mr. Atwood managed $4.5 billion. Also in April, Merrill Lynch fired another star broker, Bruce K. Lee, who then opened his own RIA, Keebeck Wealth Management. Mr. Lee and his team had $2.9 billion in client assets.

The three groups were part of Merrill's elite private banking and investment group, or PBIG.

"We want to have all of our advisers grow and retire here," said the Merrill Lynch executive who asked not to be named. "We never want to see strong advisers leave for whatever set of reasons."

The executive added that, regardless of the media attention and articles, the attrition rate for Merrill Lynch's advisers "is running near record (low) levels."

Merrill Lynch's headcount of 14,820 at the end of June was essentially flat compared to the same quarter last year, as well as the end of the first quarter in March.

Record revenue of nearly $9.6 billion during the first half of the year exceeed the first half of 2017 by $278 million, or 3%, the company reported.


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