Merrill compensation lowers small household payouts

Merrill is lowering its payouts for advisors who work with “small” households while adjusting its incentives to direct clients to banking products and money market funds.

Those changes are part of a 2026 compensation package that otherwise leaves the Bank of America subsidiary’s pay policies unmodified. Merrill’s new policy for small households concerns advisors who work with clients with $250,000 to $500,000 in assets and loans. Starting next year, advisors will be paid only 20% of the revenue they generate for the firm from these clients.

The firm’s current small-household policy, adopted in 2012, pays advisors nothing for working with households with $250,000 or less. That payout rate will remain in place for households falling under the $250,000 threshold.

The firm’s new 20% rate for working with households in the $250,000-to-$500,000 range is a much lower rate of pay than advisors receive for working with wealthier clients. For instance, Merrill advisors who now generate $1 million in annual revenue for the firm by working with non-small households receive a payout rate of nearly 47%.

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Merrill noted that the new policy for small households is unlikely to affect most advisors. Of the net new households the firm added in the second quarter, more than three quarters had more than $500,000 in assets and loans. On average, the firm’s new households exceed the $1 million mark.

Also as part of the change, Merrill is extending a temporary exemption that allows advisors for a short time to receive a normal payout rate for bringing in new households. This “lookback” period will increase to six months from three starting next year.

Morgan Stanley last week likewise announced changes to its policy for payouts on small households. Starting next year, Morgan Stanley will pay nothing for working with households with up to $300,000 in assets and loans, up from $250,000 this year. Morgan Stanley exempts new households that were brought in over the past year and households that are bringing in more than $25,000 annually in net new assets and loans.

Merrill is also boosting its incentives used to encourage advisors to steer investors to banking products. Advisors who already qualify for its banking growth award will be able to receive a payout of between 0.1% and 0.25% (10 to 25 basis points) on client money placed in preferred, brokerage and Bank of America checking and savings accounts. The additional incentives will be calculated at the end of 2026.

The firm meanwhile is reducing the incentives it offers through its Merrill Growth Awards to advisors who steer clients into banking deposits and money markets. Advisors next year will receive 0.02% (2 basis points) on money moved into those types of accounts. 

The Merrill Growth Award now pays 0.12% on anything up $50 million into various types of accounts. Beyond that $50 million threshold, it pays 0.03%. Next year, the 0.12% will remain in place for accounts besides deposits and money markets, including advisory accounts.

The changes come after a year in which Merrill made virtually no changes to its broker compensation policies. 

This story is developing. Check back for updates.