The way in which advisors are compensated is being adjusted to fit with a broader growth strategy.

Merrill Lynch’s wealth management arm is bringing out a new remuneration scheme for advisors under its “grid” system, with specific incentive payments for high-performers and cuts for those who fall short, according to a memo seen by this news service. 

Family Wealth Report has learned that the US firm is introducing what is called a New Growth Grid Award program, which includes up to a +2 per cent grid increase incentive for the acquisition of new clients and net new asset and liability flows. Similarly, advisor grid rates can fall by up to -2 per cent if minimum hurdles are not met.

The way that the “grid” system works is agnostic in terms of products.

Merrill Lynch, which like its rivals faces a changed wealth advisor landscape amid introduction of the Department of Labor Fiduciary Rule, which is seen as encouraging fee-based advice, is looking to step up performance, with compensation one of the remaining areas to change after a series of other moves by the organization. 

Because of the new system, the current Strategic Growth Award program will disappear next year; that program had a narrower focus and was only based on net new strategic flows of certain products.

The award hurdle for net new assets and liabilities is set at 5 per cent of prior year-end assets and liabilities and the hurdle is capped at $15 million. 

The firm also continues to require two referrals per sole practitioner or per experienced advisor on a team. But it no longer applies a 1 per cent grid penalty related to outbound referrals. However, the two referral requirement must be met for an advisor to secure the growth grid award increase, the team grid award or recognition trips. 

Merrill Lynch is also hiking its payout opportunity for Client Transition Program advisors by as much as 240 per cent (CTP is for advisors who are transitioning out of the FA role, such as retiring). 

Among other developments, Merrill Lynch is no longer allowing advisors to be compensated for providing services to their own or family member’s IRA or other accounts that are subject to the IRS code 4975 prohibited transaction rules.