Merrill Lynch Brokers Must Meet Referral Quota
December 07 2016 - 11:00AM
Dow Jones News
Merrill Lynch will require its brokers to make at least two
client referrals to other parts of parent Bank of America Corp.
next year to avoid a cut in pay, a tweak to how the bank
compensates its more than 14,000 brokers, people with knowledge of
the matter said.
Merrill executives unveiled the changes to its brokers on
Tuesday and said they would leave unchanged in 2017 the so-called
pay grid, which accounts for the vast majority of a broker's
compensation by paying them a percentage of the fees and
commissions they generate.
Merrill brokers who fail to meet the referral quota to other
parts of Bank of America—including its online brokerage platform
Merrill Edge, its retail bank and other units—will see 1% shaved
from their take-home pay or deferred compensation depending on how
much they produce in fees and commissions, the people said.
Bank of America is making the change as rival Wells Fargo &
Co. continues to deal with the fallout of aggressive cross-selling
practices that led to the opening of as many as two million
retail-banking accounts with fictitious or unauthorized
information. Merrill, however, requires its brokers only to make a
referral to another Bank of America unit, giving them credit
regardless of whether it generates new business.
The change was welcomed by Merrill brokers who had seen
more-severe modifications to how they are compensated in prior
years, the people said. For 2016, Merrill increased certain grid
thresholds that would have caused some Merrill brokers to lose 2%
to 8% of their base pay unless they increased the fees and
commissions they generated. Before that, Merrill cut how much
brokers were paid on accounts with less than $250,000 in assets to
encourage them to work with bigger clients.
Rival Morgan Stanley is making heavier changes to its broker
compensation next year. The bank told brokers last week it will
raise some compensation-grid thresholds it uses to pay brokers by
about 10% to incentivize them to produce more revenue, as part of a
broader effort to rein in costs and generate more revenue.
UBS Group AG introduced its pay changes for 2017 in June. The
Swiss bank simplified its broker pay plan, increased cash payouts
for teams that generate $1 million or more in fees and commissions
and cut back the number of bonuses brokers can earn to focus on new
assets gained and length of service.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
December 07, 2016 10:45 ET (15:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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