Finally, there’s a bit of good news out of Merrill Lynch, a respite for war torn advisors exhausted with massive compliance and operations oversight, the newly released 2024 compensation grid changes throw a little bone to advisors and repeal some dreaded policies. While we don’t believe this will stop the bleeding as far as seasoned advisors continuing to leave the firm for better deals, culture, autonomy, and overall freedom, it is important to note that it is something that shows the new co-presidents have been making at attempt to listen to advisors after their 25-city tour. The key changes are as follows: 

  

Repealing Unpopular Policies: 

·  The controversial growth grid, a thorn in the side of advisors, instituted five years ago, was a system that rewarded advisors for acquiring clients and accounts while penalizing those who fell short, has been abolished. Advisors found this policy to be a distraction from client-centric efforts. 

·  Additionally, a policy introduced this year that cut up to 25% of an advisor’s payout for their brokerage business has been rescinded. 

  

New Growth Award Criteria: 

·  We view this as nothing special to write home about, in fact, some advisors feel this might even be a negative because they have been programmed to open up new accounts to be paid for it, now that is being taken away. A new growth award has been introduced, offering a measly 1/8th of a point of net flows up to $50 million, and 3 bps beyond that threshold. 

·  To qualify, advisors must bring in three new client households, each with assets exceeding $500,000. Furthermore, total assets and liabilities of existing clients must increase by 7.5% within various “strategic flow” capacities, spanning investment advisor assets to bank loans to brokerage. Presently, only an estimated 25% of advisors are projected to meet the criteria for the new growth payout.   

Retained Growth Penalties: 

·  The “minimum growth threshold” remains in place, entailing a 1% reduction in the grid for advisors with two consecutive years of negative net strategic flows. 

  

New Incentives: 

·  Advisors with 55% of their households utilizing Bank of America checking accounts will receive a special award. 

·  Full credit will be granted for all new revenue generated from Merrill’s fresh issuances of equity and debt. We note that this “hawking” of ML banking products is one of the big reasons advisors are leaving, many departing teams believe this has led to attrition in their practices and is questionable given Reg BI. 

  

Discounted Trades Adjustments: 

·  Payouts for trades discounted by 60% will decrease by 20%. For trades discounted by 80% or more, there will be no payouts. The message is you must be a fee-based practice.  

  

Core Grid Remains Largely Unchanged from 2023: 

·  Accounts with balances under $250,000 will not yield payouts, primarily focusing on larger households. 

·  To qualify for bonuses and awards, advisors must secure two outbound Bank of America referrals. 

  

Teams: 

·  In team settings, at least one member must hold a CFP certification. Certain engagement criteria have been eliminated, aiming to foster a more collaborative approach rather than solely rewarding top producers. 

  

While these changes offer an overall positive message to Merrill advisors, is this because they have become desensitized to expect more cuts each subsequent year?  It is important to also note that the announcement does not relate to other lingering concerns. Issues such as stringent operational and compliance oversight, pressure to promote specific products (observed in this new grid announcement itself), and a prevailing culture demanding conformity to new norms still remains. While the effort to reinvigorate an entrepreneurial mindset among advisors is commendable, further steps are required to fully realize this vision.