Merrill Lowers Goalposts for “Client Engagement” Bonus
Merrill Lynch Wealth Management is making it easier for brokers and teams to qualify for a “client engagement” bonus aimed at selling more bank products to their customers.
Merrill Lynch Wealth President Andy Sieg told employees Monday that they will have more time to hit their sales goals and also receive credit for products that previously did not qualify, including core Cash Management Account and customer mortgages that advisors didn’t originate.
“We believe these changes will help advisors and teams achieve the program’s objectives by providing additional time to reach the benchmark and more flexibility in options available to gain credit for expanding client relationships,” Sieg wrote.
The decision indicates that brokers were complaining of being pulled in too many directions, having to hit new account growth bogeys to avoid payout penalties at the same time that they were being pushed to sell more Bank of America loans, mortgages, deposit accounts and fee-based investment products to existing customers, said people familiar with the change.
The changes affect the so-called Client Engagement Program (CEP) that Merrill introduced in its 2019 compensation program. The CEP pays brokers 14 basis points on client checking and savings account balances (up from the core 4 basis points) if 30% of their clients use at least three services (trust accounts, loans, checking accounts and the advisory platform) and two digital services (e-delivery, mobile apps and other online programs).
Team members must hit the CEP targets in order to qualify for the payout grid that pays each advisor at the level of the highest earner in the group. Qualified teams will now have until July 2020 to hit the 30% engagement goal, six months later than the original deadline. (Merrill earlier this year lowered the customer engagement bogey to 30% from 40% of household accounts.)
Merrill also is allowing CMA accounts opened in 2018 or earlier to meet the breadth-of-relationship requirements, as well as first mortgages and home equity lines of credit that were not referred by advisors. Most Merrill clients use CMA accounts.
Also, new households added to meet the growth requirements will not count in the 30% calculation, according to Sieg’s memo that directly addressed complaints that not enough brokers could meet the award requirements.
“Now that we have reached midyear, we are making adjustments based on both the program’s progress and the responses we have received from field leaders and advisors,” Sieg wrote.
The firm in January also loosened targets for brokers in “community” markets more than 10 miles away from Bank of America branches, giving them double credit for satisfying lending or checking criteria.
Merrill has lost several large-producing teams in recent weeks to smaller firms and to wirehouse rivals such as Morgan Stanley, just weeks before the first phase of the payout clawback takes effect for brokers who fail to generate at least four new household accounts.
Sieg is not backing off of the growth program, saying last month that there is ”room to run with this strategy.” The so-called growth grid pays an extra 100 basis points to brokers who generate six new household accounts over $250,000 but deduct 100 basis points from those who generate fewer than four new accounts.
Merrill also is deducting the first 3% of a broker’s monthly production from his or her payout calculation this year because compensation was growing faster than revenue, Sieg said earlier this year.