Nearly one-third of Merrill Lynch’s advisors suffered cuts in their pay because of the carrot-and-stick compensation grid the firm implemented in 2019.

Merrill Lynch’s advisor roster shrank by 199 to 17,458 in the fourth quarter from the prior quarter. The wirehouse's advisor attrition rate reached 4% for the full year in 2019, according to a senior executive at the wirehouse who spoke to reporters Wednesday after Bank of America released its fourth quarter results.

The same senior executive focused on the flipside of the impact of the comp grid, saying “70% of our advisors in 2019 will have again experienced a positive or no impact” from what the wirehouse calls the “growth grid.”

“We feel this program is functioning very well, and it has proved to benefit advisors,” said the senior executive, who asked not to be named. “Advisors responded and stepped up in terms of client development and focus on flows in order to continue achieving the benefit of growth.”

The growth grid likely has helped bolster the size of the wealth management unit's client balances, which reached $3.05 trillion at the end of 2019, an increase of 16% from the fourth quarter of 2018. In its earning release, the company attributes the growth to higher market valuation as well as $88 billion in net inflows in AUM in the fourth quarter.

Merrill Lynch’s 2019 growth grid made it more challenging than the previous year for advisors to net as much compensation. That growth grid remains for 2020.

Under the 2019 growth grid, goals were set to have advisors add at least six new households to their client roster to qualify for comp awards, and they risked losing pay if they didn’t add a minimum of four households. Waivers exist, however, depending on the new-client households’ assets with the wirehouse.

Advisors who add one household client with $25 million or more in assets, for example, get credit towards their “growth grid” bonus as if they had added four household clients with $2.5 million or less in assets.

Advisor exits

The shrinking advisor roster numbers appear to reflect, however, the likelihood that some Merrill Lynch advisors have exited in part due to the compensation changes.

Merrill Lynch attributed the drop “in large part to seasonally lower hiring in our training program.”

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The total number of wealth advisors in BofA’s global wealth and investment management unit, which includes Merrill Lynch and Private Bank, was 19,440 at the end of 2019. That was 232 fewer than in the third quarter, and 19 fewer than the previous year, according to the wirehouse.

Asked to provide more detail about the advisor roster numbers, the senior executive said the attrition rate had hovered around 4% for 2019 but dropped to 3.4% in the fourth quarter.

He declined to break out how many of Merrill Lynch’s FAs work for the brokerage or BofA’s online advisor-assisted platform.

“We’re trying to point to the market’s attention to the overall size and ranks of our advisors,” he said.

“Increasingly, advisors at Merrill and the private wealth business are working as one interconnected team, across the continuum of client opportunities. We think that’s the right way to run a business,” he added.

Merrill Lynch will focus on organic growth by tapping trainees and helping them become advisors, the executive said, when asked about any future recruiting of experienced advisors.

The wirehouse bolstered in 2019 its recruiting of advisors who have between two and seven years of experience at regional broker-dealers, the executive said, adding recruiters helped hire 60 such advisors last year.

“We are seeing more interest in terms of advisors joining us,” the executive said.