A year after adding perks and rolling back some criticized components of its compensation plan for financial advisors, Merrill Lynch revealed that it is largely sticking with the same pay structure for 2025.
The wirehouse will make no changes to its compensation grid rates, hurdles or payouts, according to a source familiar with the plan.
"We are keeping the advisor plan virtually unchanged," said Tim Shook, Merrill's head of advisor strategic programs and performance, in a statement provided to FA-IQ.
"The 2025 plan is a reflection of our commitment to advisors to offer consistency, transparency and simplicity," Shook added.
Last year, with new management in place, the wirehouse ditched an unfavorably viewed policy that rewarded advisors who added clients and assets while penalizing those who did not, replacing it with growth bonuses, though some penalties remain for advisors with consecutive years of negative strategic flows.
This year's plan to hold steady was predictable, according to Andrew Tasnady, owner of the New York-based compensation consulting firm Tasnady Associates. He said wirehouses typically make impactful changes to their comp plan only once every three or four years -- or when there is a management change. Tasnady added that advisors appreciate year-to-year consistency in their compensation.
"In general, advisors don't like changes on comp plans unless you're removing a pain point, which is what Merrill did last year," Tasnady told FA-IQ.
Merrill did include one minor enhancement in its 2025 comp plan. The wirehouse is tweaking its banking-growth award to help the small population of advisors in Merrill locations outside of Bank of America's footprint. Those advisors will have a lower hurdle to clear to earn bonuses on client assets in BofA checking accounts, according to a source familiar with the plan.
Rival wirehouses Morgan Stanley and Wells Fargo also refrained from making major changes to their 2025 compensation plans, announced earlier this month. Both raised the production bar for lower producers, and Morgan Stanley boosted incentives for referrals to other lines of business.
In an environment in which wirehouse advisors are increasingly seeking independence, wirehouses recognize that raising hurdles for larger producers may accelerate that trend, according to Mark Elzweig, president of the New York-based recruiting firm bearing his name.
"Firms are very reluctant now to tamper with their grid in any way," Elzweig told FA-IQ, noting the increased competition for "good advisors" thanks to new independent firms coming to market. "Somehow monkeying with the grid right now is not unlike putting your hand on the third rail of a New York City subway. It is not a brilliant idea."
Elzweig added that he expects the wirehouse compensation plans to remain steady for the foreseeable future, with the only changes being enhancements for better producers and increased penalties for lesser producers -- a measure Merrill did not take this time around.
Morgan Stanley raised its "penalty box" production threshold to $360,000 for 2025, from the current threshold of $300,000, while Wells boosted its 2025 threshold to $330,000, also from $300,000.
The threshold increases are reflective of wirehouses trending toward working with more affluent advisors and trying to nudge lesser producers into self-directed channels or call center roles, according to Louis Diamond, president of Morristown, New Jersey-based Diamond Consultants.
Diamond says Merrill's decision to hold the bar for lesser producers is a "smart" move and a "victory lap" of sorts for Merrill Co-Presidents Lindsay Hans and Eric Schimpf, now in their second year leading the wirehouse.
AdvisorHub first reported Merrill's new comp plan.