Merrill Lynch & Co., the nation's biggest brokerage, on Monday unveiled a new, simpler pay plan aimed at rewarding brokers who manage bigger accounts and bring the firm business that generates ongoing fees.
The plan is another step in Merrill's efforts to emphasize continuous fee income over commission income from stock trades, which can swing with market moves. It also reflects the broader trend on Wall Street to focus on higher-net-worth customers while limiting services for smaller clients.
Merrill, which has about 15,000 U.S. brokers managing $1.5 trillion in total client assets, is aiming to reel in more investors whose assets exceed $1 million. Those wealthy customers pay fees based on their account size, not per trade.
Merrill's fee-based accounts are charged 1.5% a year on assets held in stock, 1% on mutual fund holdings and 0.3% on bond and cash holdings. Brokers working with those accounts now will get a bigger chunk of the compensation pie: Merrill said it will pay brokers as much as 56% of the revenue generated from fee-based accounts, up from a high of 46% in the firm's existing plan.
Brokers will get 90% of their payout in cash and 10% in long-term compensation, such as Merrill stock.
The new pay plan--which will replace a much more complicated pay scale--will take effect in 2002.
The change is part of Merrill's ongoing effort to differentiate its client base, which ranges from rich executives worth hundreds of millions of dollars to mom-and-pop investors with less than $100,000 in the stock market.
Merrill has set up call centers to deal with accounts with less than $100,000 in investable assets. Brokers don't get paid to service those accounts.
Merrill shares (ticker symbol: MER) fell 88 cents to $45.62 on the New York Stock Exchange.