Merrill Lynch has added a big sweetener to payouts for advisors on the brink of retirement by tweaking its Client Transition Program (CTP).

The wirehouse announced Wednesday an increase in its award payouts to retiring advisors for all production levels. The award has increased by five percentage points for the lower-production tiers while the top producers ($7.5 million or more) could see their payout jump by a whopping 75 percentage points to a maximum of 275% of their trailing-12 month production.

CTP payouts are calculated when advisors enter the program and equal an advisor’s trailing 12-month production multiplied by their CTP award percentage.

Advisors producing less than $1 million would see a maximum payout of 160% of their production. Advisors producing between $3 million and $4 million could get 225%; those with $4 million to $5 million could get 235%; and those producing in the $5 million to $7.5 million-range could get a maximum payout of 260%.

Advisors qualify for the program if they are at least 55 years of age, have spent five or more years at Merrill Lynch, and a combination of those two factors exceeds 65. The new changes will be applicable after November 1, 2021. Advisors entering the program prior to that date will enter based on the existing program.

Focus on Retention

“We want all of our advisors to start here, build their client base here, and retire from here,” Merrill Lynch Wealth Management President Andy Sieg said in a company memo.

This is a big move, especially considering Merrill Lynch announced just last month that it would not be making any changes to its compensation grid for 2020, and it is clear that the firm is looking to retain advisors as well as assets. But was it successful? Somewhat, say experts.

"It's an honest attempt by Merrill Lynch to acknowledge the attrition they've had at the top of the food chain, and to acknowledge that they needed to make the deal more competitive," says Mindy Diamond, longtime industry recruiter and president and CEO of Diamond Consultants.

"I think it will get some people to stay for sure -- I think particularly at that $7.5 million level," says Diamond. But she cautions that there may be others who might not find this deal good enough to stay.

Danny Sarch, president of recruiting firm Leitner Sarch Consultants, agrees.

"If money is the problem that you want to fix, then this will make a certain number of people stay with Merrill Lynch who would otherwise have left for greener pastures and bigger money. But if money is not the problem that you want to fix -- you're upset with the competition internally for Merrill Lynch or the bureaucracy or the other things ... the money will not fix it," says Sarch.

Good deal for retiring advisors?

“It's a better deal than it was before. It's a good deal for an elite advisor, [and] certainly rewards top advisors the most. It's a good deal for top advisors, if they were planning on retiring from CTP anyway,” says Diamond.

Other enhancements to the program include a fixed payout system for senior active consultants, with Merrill claiming it is the only firm in the industry to do so. Advisors need to meet certain criteria to be termed senior active consultants, and those include being a part of the team and committing to remain a part of the team through the transition.

“We are eliminating much of the downside risk for the CTP payments for advisors in the program,” a company executive told journalists on a call Wednesday. “What that means is that the dollar amount of their CTP award is determined when they enroll in CTP and it remains the same throughout the payout period.”

But top-producing advisors within 10 years of eligibility of the CTP program and veteran advisors who have been with Merrill Lynch for more than 20 years who are older than 65 years of age, regardless of their production level, are eligible for more perks.

Another revision includes a floor on the CTP award level for such “top-tiered” or “long-tenured” advisors. For such advisors, the CTP award will not fall below the floor, though it may have the potential to go up in the future.

“The percentage can reset to a higher level in later years if performance improves, but it will not decrease,” Sieg said in the memo.

A company executive further explained that chances of the percentage going higher is likely because it is linked to both years of service and performance, adding that those who are eligible for this award in 2021 will shortly be receiving personalized letters with their enrollment terms.

Not such a good deal for inheriting advisors?

The firm says it has some good news for inheriting advisors too. By modifying its recovery payout structure, the firm is giving the succeeding advisors a shorter recovery period.

The inheriting advisors can shorten their CTP award recovery period until such time that 80% of the award has been paid off, while Merrill Lynch would bear the remaining 20% of the cost. Presently, the firm recovers 50% over five years.

“We're recovering more, in some cases, up to 100% of the CTP payout. And [advisors] rightly pointed out to us that that's not the right incentive structure,” explained a company executive. “We’ll do it up until we recover at 80% of the CTP award, we're committing to subsidizing 20%,” the executive added.

But experts say the inheriting advisors may be getting the short end of the stick.

“The people that it puts at risk are the next gen, the team and the clients, because it's tying them up for seven years. That’s the life of the agreement. And then plus making them wait two years before they're able to sign on to it,” says Diamond.


It's great for inheriting advisors that are certain they want to stay at Merrill Lynch, Diamond explains, but for those who are unsure it could pose a challenge. “Nine years is a long time to commit to a firm when you have little control over the changes that are made in that period of time,” says Diamond.

The memo also says Merrill Lynch is offering the ability for producers making more than $5 million to partially transition their books to their teams even before completely entering the CTP.

But the new program does not necessarily mean more paperwork for advisors.

“We are not introducing any incremental documents for advisors to sign and there are no “garden leave” provisions associated with these enhancements,” said Sieg in the memo. A company executive also explained that no additional paperwork would be required of either the retiring or the inheriting advisors, and that would include non-solicitation agreements.

(This article is an update of breaking news which originally ran Wednesday, November 6, 2019.)