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Merrill pay plan focuses on broker teams and trust assets

By Jed Horowitz

NEW YORK, Dec 4 (Reuters) - The 2014 compensation plan that Merrill Lynch introduced on Wednesday rewards brokers who work in teams and pays them a premium for attracting money from wealthy clients that is put into trusts.

The brokerage firm owned by Bank of America Corp has not made any changes to its core payout structure for next year, but has introduced a "client experience" achievement award that requires brokers to work in teams, the first time it is offering a monetary incentive for teamwork.

The new pay plan, outlined to Merrill's 14,000 brokers on Wednesday afternoon, also doubles the revenue credits brokers get for attracting trust assets from wealthy clients and enhances a retirement program for brokers over the age of 55 to help Merrill retain their clients.

Big firms such as Merrill, Morgan Stanley and Wells Fargo & Co's Wells Fargo Advisors believe teams enhance service because brokers can specialize in areas such as investment management and lending.

Brokers and recruiters say teams also make it harder for top salespeople to bolt to rivals since it is difficult to move en masse while retaining clients.

About 55 percent of Merrill's brokers now work in teams, a spokeswoman said.

The new "client experience" award requires qualified teams of brokers to remain at Merrill through the end of 2018 to qualify. At least one team member must have a professional Certified Financial Planner or Certified Financial Analyst designation and complete a "goals-based wealth management training program" and assessment test.

Each team that doubles the revenue collected from clients over five years will be given 10 percent of the incremental amount over the team's 2013 revenue, the baseline. Teams will split the award, which is paid 50 percent in cash and has no monetary limit, among themselves. Merrill has not yet determined how the rest will be awarded other than to say it will be deferred over the long term.

"We are encouraging teaming and incentivizing teams. We are not mandating teams," said Susan McCabe, a bank spokeswoman.

Merrill is using a relatively loose definition of teams to appease some lone-wolf brokers. Advisers can loosely affiliate with other brokers who have areas of specialty, or even with a trainee, rather than share clients in a formal relationship.

Merrill also has tweaked its Strategic Growth award introduced a year ago to encourage brokers to focus asset gathering in distinct areas. The 2014 focus is trust and estate business that can be directed to any part of Bank of America.

Brokers will be credited with double the total fees they bring in for creating or supplementing trust programs, an initiative Merrill believes will help them with the intergenerational transfer of assets among wealthy clients.

The award continues to offer full - but not double credit - for all fees related to loans and fee-based accounts that brokers generate. Many of the United States' largest brokerage firms are now owned by banks, which have been trying to get brokers to sell more banking products and fewer commission-based investments.

Merrill's new plan also enhances a program for brokers over the age of 55 to plan their retirement. Those who enter what is called a "client transition program" will be able to stay on for two to four years and get up to 160 percent of the amount of money they collected from clients in the 12 months before entering the program. Prior to introducing the program, brokers who sold their client lists had to immediately leave the firm.

Earlier this week, UBS Wealth Management Americas and Morgan Stanley posted their 2014 compensation plans for brokers.

UBS AG's UBS Wealth Management Americas offered strong incentives for its brokers to prepare financial plans for their wealthiest clients and to win higher expense account allotments.

Morgan Stanley is allowing more of its advisers to qualify for a revenue "growth" award introduced last year for the top 40 percent of brokers. In 2014, any broker who brings in $300,000 more revenue through fees, commissions and loans than in 2013 can get the award, which ranges from $20,000 to $300,000, based on production and experience.