Merrill Lynch Reportedly Flirting With Bonus Pay For Running Fewer, Bigger Accounts -- But The Bugs Might Not Be Worked Out Yet

Wednesday, July 13, 2011 05:49
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Merrill Lynch Reportedly Flirting With Bonus Pay For Running Fewer, Bigger Accounts -- But The Bugs Might Not Be Worked Out Yet

Tags: high net worth | Merrill Lynch

Memos have been flying around Merrill Lynch about ways to get the Thundering Herd to court higher-quality clients and stop simply gathering the assets.

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Dow Jones got its hands on one proposal that would pay Merrill advisors a bonus if they trim their books to no more than 150 families, most of which have $250,000 or more to invest -- the firm's target for "affluent" investors. 

 

A full 35% of the money has to be in fee-based accounts and yes, cross-selling into advisory and banking products would be rewarded.

 

Finally to be eligible for the bonus, Merrill advisors need to get their client retention numbers up to 98% or above.

 

Additional incentives are available for advisors who get professional certifications or shift to a team-driven approach.

 

It's not clear whether Merrill hopes the smaller accounts will be shifted to Merrill Edge, which is explicitly designed to work with clients with under $250,000.

 

Merrill advisors currently work with about $98 million apiece on average.

 

That means that in order for the high-net-worth "enhanced" grid to kick in and make sense, they've got to make sure that each of their no more than 150 client households actually has at least $650,000 invested in the firm.

 

The typical Merrill advisor who simply followed all the rules and courted the maximum number of clients with the minimum $250,000 to invest would actually have to surrender $60 million in AUM and 2/3 of his or her production. 

 

Surely Merrill doesn't want that.

 

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