Merrill Eases Quota on Account Growth, Citing Coronavirus Issues
Merrill Lynch Wealth Management has lowered the new household account targets its brokers must hit to avoid payout penalties, citing the effects of social distancing constrictions on prospecting.
He also lowered the mid-year household requirement to one from two households, and said brokers subject to a June 30 penalty can voluntarily defer it until yearend “to avoid any near-term cashflow reduction” and potentially “course correct.”
Merrill Lynch in March had suspended its requirement that brokers have at least 30% of client accounts in banking, trust and advisory programs by midyear to qualify for higher “team grid” bonuses, but at the time said it was keeping its growth targets for new households and net new assets intact.
In a memo to the firm’s 14,000 brokers on Monday, Sieg acknowledged that some were hitting walls under Covid-19 restrictions.
“[W]e recognize that some practices have been impacted, and in response, we’re implementing modifications to limit your downside,” Sieg wrote, but also congratulated the bulk of the salesforce for staying focused on the growth grid targets introduced in 2018.
Merrill has added over 1,000 new households per week since early March, “a powerful testament to your ability to adapt,” Sieg wrote, noting that the revised grid preserves the “upside” of the growth grid.
Brokers who add at least six new households of $250,000 or more this year will receive an additional 1% cash grid payout credit, and advisors are also eligible for another 1% bonus by raising client asset-and-liability holdings by 5% or more. (They lose 1% if asset-liability growth falls below 2.5%, and Merrill is not modifying its asset-growth target.)
About 1,000 advisors would likely have been hit with the 100-basis-point credit demerit as of June 30 if the modification on new accounts had not been made, a Merrill spokesman said.
While almost all brokerage firms motivate advisors with growth incentives, Merrill is the only wirehouse to have growth penalties. It also for the past two years does not pay advisors on the first 3% of monthly revenue, which along with the growth demerits has caused some grumbling internally.
Merrill has celebrated its growth formulas, noting that brokers added almost 41,000 new households in 2019, up 25% from 2018. About 70% qualified for growth credit increases or remained neutral last year.
Other firms also have made modifications in compensation goals in light of the coronavirus pandemic.
UBS Wealth Management two weeks ago curtailed an advisor-funded expense program after some of its almost 6,000 U.S. brokers complained that they cannot find enough travel-and-entertainment expenses to offset money being deducted pretax from their compensation. In May, UBS delayed the effective date of higher hurdles it planned to impose to achieve team grid bonuses.
Morgan Stanley similarly delayed from Spring until Fall higher grid revenue thresholds for its 15,400 brokers.
Edward Jones this month began offering no-interest loans to advisors whose revenue has dipped below 80% of their trailing six-month average. Wells Fargo Advisors and RBC Wealth Management-U.S. each eased small-account policies for brokers after markets bottomed in March.
Merrill’s modification of its growth-grid account target was earlier reported by “The Wall Street Journal.”