It is being reported that the latest compensation changes being made by Merrill Lynch Wealth Management to encourage brokers to go after wealthier clients will include the raising of the minimum account size to $250,000 per household, from $100,000.
Specifically, it appears that the firm will continue to pay advisers their retail compensation rates on existing accounts in that range, but advisers will only get a 20% payout on new clients with less than $250,000 in assets and if more than 20% of an adviser’s book is comprised of these smaller clients, the firm won’t pay at all for new clients below the threshold.
While this will not have any impact on many of the more experienced Merrill advisers, who typically have few clients with less than $250,000 in assets, this could have a significant impact on a few categories of advisors:
(1) Newer, less established advisors (generally called trainees). These advisors are usually just now starting to build their book of business and often focus on younger clients whose accounts will grow with the advisor over the course of the advisor’s career.
(2) Financial advisors that focus their business on smaller accounts.
(3) Advisors in smaller or less affluent areas that simply do not have a lot of individuals in their area that meet these requirements.
For each of these advisors, the changes will have a substantial impact. Additionally, if any of these advisors were recently recruited to Merrill Lynch and were not informed of this impending change, they may even have employment claims related to the representations made at the time or hiring to induce them to join the firm (i.e. the advisor may have been assured that he/she would continue to be permitted to focus on these smaller types of accounts).
Securities employment litigation is not uncommon in the recruiting context and can include claims for misrepresentation, breach of the implied covenant of good faith and fair dealing, and breach of contract (usually an oral agreement).
It would not be surprising to see many of these advisors who are essentially being forced to switch firms to survive to look into their legal options.
While it does not appear that Merrill’s move on account minimums has yet to be followed by its large-firm competitors, such as Morgan Stanley Smith Barney, and UBS, it would not be surprising to see the entire industry shift this way as a necessary means to increase profitability.
If you are a financial advisor feeling the squeeze by Merrill Lynch’s move to larger accounts and would like to speak to a securities attorney to discuss your legal options, The White Law Group may be able to help. To speak to a securities attorney, please contact the firm’s Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.