Merrill Lynch’s 2016 Payment Plan Focuses on High Net Worth Clients

Merrill is encouraging advisors to increase their productivity not through payout incentives, but by raising the threshold for the same amount of work.

It was back on December 3rd, 2015 that the payment plans for 2016 were made known by Merrill Lynch.

Financial advisors who have less than $1.5 million assets under management (AUM) must generate $650,000 in fees and commissions in order to be eligible for 41% payout.

This is a $50,000 increase from the previous threshold of $600,000 for the same payout.

This means if an advisor brings in the same amount of revenue this year as they did last year, their pay will decrease (about 2 to 8 percent). So they’ll have to work harder for the same income essentially.

There is no change in the payment plan for those who have over $1.5 million AUM.

This current modification was made to prepare for the Labor Department’s passing of its fiduciary rule. This requires advisors to choose investment products in the best interest of their clients irrespective of how much fees/commissions they could earn.

Merrill Lynch 2016 Payment Plan
Neff Conner/Flickr

Merrill Lynch claims that they put the updated productivity ranges in place to promote the growth of its 14,000 advisor force.

By the time the third quarter came to an end, approximately 54% of Merrill Lynch advisors had at least half or more clients in a fee-based account. Also, since 2009, the average advisor productivity had increased from $525,000 to more than $1 million according to the company.

Merrill Lynch, along with other firms, have a recent history of raising payment thresholds and encouraging their advisors to produce more revenue for the firm.

In 2011, Merrill demoted brokers who’ve been at the firm for over 10 years yet were still generating less than $250,000 in commission and fees from clients. They had the option of leaving the firm or taking a lower position, but couldn’t serve as an advisor.

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They, in a sense, followed suit with UBS when they let go of 650 brokers who were generating less than the same $250,000 threshold.

Also, in 2015, Merrill implemented an 80/20 rule. This meant that within an advisor’s list of accounts, if over 20 percent of client accounts were between $100,000 to $250,000, they would not receive a 20 percent¬†payout that year.

However, if it were less than 20% and 80% of their book of business consisted of accounts over $250,000, then they’d receive a 20 percent payout.

Its clear that when times are tough through economic downturns and governmental regulation, finance industry professionals are put to the test.

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