Merrill Lynch to sweeten the pot for retiring advisers who stick around

Merrill will boost what it pays advisers who commit in 2021 to 'client transition program'

Nov 6, 2019 @ 5:33 pm

By Bruce Kelly

As the financial advice industry intensifies its fight for client assets, Merrill Lynch said Wednesday that it will sweeten the pot for financial advisers who commit in 2021 to retiring from the firm and handing their clients over to colleagues.

In a memo to advisers, Andy Sieg, president of Merrill Lynch Wealth Management, outlined the "significant enhancements" to the program, dubbed the "client transition program" at the firm.

One point Mr. Sieg stressed was that Merrill Lynch was not creating a new garden leave provision, or blocking the adviser from working with clients while he or she is not coming to the office but is still under contract. A common anxiety among wirehouse advisers is that in the future, the large firms will include or strengthen garden leave provisions in employment contracts, tethering advisers even more tightly to the firms.

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All advisers who decide to enter the Merrill Lynch program will see a boost in pay when the program takes effect in November 2021.

The increases range from 5% to 75% of an adviser's trailing 12, or annual fees and commissions. The advisers will be called "active senior consultants," and will remain at Merrill Lynch and work with their team for two to four years after they enter the program to help transition the clients.

Such agreements for advisers looking to retire are common in the retail securities industry. Mr. Sieg emphasized that the level of payout to the adviser under the program is fixed rather than a level that could fluctuate if pegged to the future value of the client assets.

Merrill Lynch, like some of its competitors, has pulled back from recruiting advisers, which is expensive, and instead is focusing resources on building advisers' books of clients and retaining those clients. This increase fits into that strategy.

Advisers who produce less than $1 million in annual fees and commissions are on the low end of the scale, while those with $7.5 million and more — a rare breed — are at the highest end.

Advisers become eligible for the program when they have achieved a combination of two criteria, according to Merrill Lynch. They need to have been with the firm for five or more years, and be at least 55 years old. The combination of their age and their time at Merrill must add up to 65 or more.

Payouts from the program are based on an adviser's production level and number of years with the firm, as well as the portion of an adviser's business that is fee-based.

[More: Andrew Sieg of Merrill Lynch on bank synergies and acting in clients' best interest]

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