Editor’s Note: This is the last article in a three-part series that looks into the wirehouses’ increasing reliance on client loans to help boost their profitability.

Jonathan Trusty says he and his FA team fled Merrill Lynch to escape the pressure they felt to shore up client loans if they wanted to maintain their prior year’s compensation levels.

Trusty and his team — along with the $200 million in client assets at his Nashville, Tenn.-based firm, Southern Oak Wealth Group — moved to the Sanctuary Wealth RIA network in June last year.

At Merrill Lynch, members of Trusty’s team could qualify for the team’s top earners’ payout rates if 30% of their clients had loans — such as home equity loans, cash-out mortgage refinancing or margin borrowing — according to the compensation plan.

Bolstering clients’ loans was not the only route for team members to win those higher grid rates, however.

“We did not feel a fiduciary partnership [with Merrill Lynch] when we were basically driven to do things that we didn’t feel comfortable doing,”
Jonathan Trusty
Sanctuary Wealth Partners

Alternatively, the FAs could get the same payout result if at least 30% of their clients had taken out those loans or used the bank’s trust services or bought certain types of insurance coverage, Trusty says.

Under Merrill Lynch’s 2020 pay formulas, an FA’s primary compensation is based on a productivity grid that largely depends on the income produced for the firm and parent bank. That individual productivity grid is product neutral.

There’s also a 2020 team grid that can boost an individual FA’s compensation. The FA receives an additional payout level based on the team’s highest producer.

The FA may become eligible for the team grid boost by voluntarily pursuing incentive goals, which include, as one option, having a pre-set minimum percentage of clients take out loans. At the same time, they must meet other metrics to receive the team grid boost — including adding to their professional accreditations and increasing their clients’ engagement with other Bank of America services.

If FAs do seek to meet the client lending goals, borrowing by multiple generations of their clients’ families helps the FAs meet the pre-set minimum.


A spokeswoman for the wirehouse says “an advisor and team’s growth goals are completely product agnostic and have been designed to encourage advisors to meet more of their clients’ needs.”

A ’shitty’ loan

But during Trusty’s time at Merrill, his team perceived the loans as the only viable way for advisors at the earlier stages of their careers — who typically had clients who didn’t need insurance products or trust services — to achieve those results, he says.

Trusty says he and his team of FAs had an unenviable choice, which was, as he described it: either accept that some members would get a lower payout rate or get more of their clients to borrow. That would have likely meant helping clients take out margin loans, Trusty says.

“It’s a shitty loan,” Trusty says about the margin loans.

His team members approached Merrill Lynch’s management about what they characterized as a problem. After getting no answer for three months, the answer they finally got from management provided them with no relief, according to Trusty.

“We did not feel a fiduciary partnership when we were basically driven to do things that we didn’t feel comfortable doing,” Trusty says.

“If you encourage that behavior, you have to supervise it. Otherwise, it’s fraught with dangers.”
Bradley Bennett
Lawyer and former Finra chief of enforcement

If his team had stayed at Merrill Lynch, around 50% to 80% of his team would have taken a pay cut from the prior year, he says. Not enough of their clients had taken out loans, or alternatively agreed to other BofA and Merrill Lynch product and service offers, so his team members wouldn’t have qualified for the team grid boost, Trusty says.

When asked to comment on Trusty’s account of his experience at Merrill Lynch, the wirehouse’s spokeswoman replied: "We can’t speak to this particular FA situation."

Bradley Bennett, a lawyer who served as Finra chief of enforcement from 2011 to 2017, empathizes with both the FAs and Merrill Lynch.

“BofA/Merrill Lynch is a business. They have a right. They want the brokers to sell the larger business,” Bennett says.

At the same time, Bennett understands the FAs’ ire, saying they could be thinking: “We are not Walmart employees, I’m not going to talk to people into wanting a credit card or a loan. That’s humiliating. It’s makes me look cheap.”

Bennett says wirehouse managers need to pair bolstered supervision with their enthusiasm to have clients take on more debt.

“If you encourage that behavior, you have to supervise it,” he says. “Otherwise, it’s fraught with dangers.”

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