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October 27, 2021 at 09:45 AM
What You Need to Know
- Merrill Lynch has made no major changes to its advisor comp structure for 2022, it said Tuesday.
- But the firm is shifting away from its retroactive comp structure in which payout is determined based on the prior calendar year’s production.
- The wirehouse is also discontinuing its Transfer Account Policy starting Jan. 1.
Merrill Lynch Wealth Management said Tuesday it’s making no major changes to its pay grid for 2022 but decided to move to a trailing 12-month grid structure and away from its retroactive comp structure in which payout is determined based on the prior calendar year’s production.
The incentive grid “remains core to the comp program,” Merrill said. But “advisor compensation will now be calculated based on an advisor’s previous 12 months of production,” starting Jan. 1, the company noted. “After each month, the most recent 12 months of production will determine that month’s grid payout.”
The trailing 12-month structure is “widely used throughout the industry” and is a “positive” for advisors because it creates more “consistency” and “predictability” in what they are paid, a senior Merrill executive told reporters on a conference call Tuesday.
Meanwhile, no changes have been made to the firm’s growth or team grids.
However, the firm said it is discontinuing its Transfer Account Policy that was enacted in 2018. “Currently, advisors receive a 50% payout on their production on retained accounts for the first 12 months,” the senior executive said. “Beginning in 2022, advisors will receive 100% payout on clients that they retain.”
Merrill also expanded the time in which advisors have to keep clients who were transferred to them from six months to one year after hearing feedback from advisors that the six months were not quite enough to cement relationships with the new clients, the executive said.
Starting in 2022, Merrill also won’t factor assets from a transferred client that an advisor loses into that advisor’s net new asset flows for the year, which could have potentially hurt the advisor’s ability to reach certain targets for bonuses, the executive explained.
Strong Advisor Performance
The decision to drop the Transfer Account Policy was made because the firm’s advisors have been “very successful in retaining accounts and “put a lot of effort into it,” so the “appropriate [way] to recognize that effort [is] by not having a haircut,” the senior Merrill executive said on the call.
Ninety-five percent of advisors are “on track to exceed their production results” from last year, while 86% of them are on track to have their best year ever, the firm said.
