EXCLUSIVE: Merrill to Unveil Mid-Year Award for New Account Growth
Merrill Lynch is putting finishing touches on an incentive that will award brokers for generating new business between August and March, an unusual mid-year program that comes as it and rivals look for ways to counter budgetary and regulatory drags on client growth.
The program will offer resort trips to top performers based on a combination of new clients, assets and liabilities (such as client loans) they introduce to the firm over the next eight months, said people familiar with the plan. It will supplement existing trips to exotic locations and resorts that Merrill, like its competitors, have long offered to top revenue producers.
While final approval of the new incentive is pending, Merrill is likely to announce it this week, the people said. The firm is taking pains to position the plan as a “recognition” award rather than a bonus or sales contest that could attract regulatory wrath, one person said.
“It’s a pretty smart idea because in today’s world it’s just hard to grow,” said Alan Johnson, managing director of compensation consulting Johnson Associates. “I think we’re going to see more of this throughout the industry.”
Large brokerage firms have traditionally relied on “buying” growth by hiring veteran brokers with loyal, wealthy clients as the fastest way to increase fees and commissions. But Merrill and its rivals in the past year have curtailed recruiting in recent months, citing high costs and concerns from their bank-owned parents that they are engaged in a zero-sum game with rivals that burdens balance sheets with signing bonuses in the form of forgivable loans.
The growth of “robo-advisor” platforms and greater scrutiny of fees charged as a result of the Department of Labor’s new fiduciary rule have also constrained customer asset growth at firms, said Johnson and other observers.
Merrill’s new recognition award will supplement its conventional “strategic growth award” that gives brokers cash or deferred bonuses for growing their books through new accounts and revenue. Merrill’s 2017 comp plan unveiled last December upped the the new assets brokers must bring into existing advisory accounts to qualify for the growth bonus.
The recognition award, which the Bank of America-owned broker’s managers say will reward “organic,” rather than bought, growth, will be product agnostic and have no minimum hurdles, the sources said. They did not provide details on metrics for qualifying for the award.