Traditional Brokers’ Compensation Models May Be Threatened As Wirehouses Hire Salaried Workers

Posted on June 5th, 2019 at 4:57 PM
Traditional Brokers’ Compensation Models May Be Threatened As Wirehouses Hire Salaried Workers

From the Desk of Jim Eccleston at Eccleston Law LLC:

According to an InvestmentNews article, Bank of America’s recent decision to transfer 300 Merrill Edge advisors into its Merrill Lynch Wealth Management branch offices may be a turning point in the evolution of compensation for financial advisors at major brokerage firms.

Contrary to traditional brokers, who are paid a percentage of the revenue they bring into the firm, Merrill Edge advisors are paid a salary. Financial industry experts view the move by Bank of America as a signal as to how banks and wirehouses want to shift compensation away from the traditional commission-based and fee-based system toward a salaried model.

The vast majority of advisors who work at the wirehouses are paid based on a plan known in the industry as the grid. Today, wirehouse advisors typically take home 35 cents to 45 cents of every dollar of revenue generated from the grid, by far the largest expense at a wirehouse. That means an advisor serving clients with $100 million in assets and bringing in $1 million in revenue would earn between $350,000 and $450,000 a year. Replacing that pay model with an annual salary of $150,000, with perhaps another $50,000 in bonus, would cut costs considerably for the wirehouses.

The article states that, while such a transition could cut costs and increase profits for the firms, it could dramatically reduce compensation for advisors and change the culture at the wirehouses from an entrepreneurial model to a more corporate mindset. It also could make it easier for firms to cross-sell banking products and hold onto clients when advisors leave their firms.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: james eccleston, eccleston law, eccleston law llc, eccleston, broker compensation model, merrill lynch, financial advisors, wirehouse advisors

Return to Archive



You guys are good!

Mike L.


August 8, 2022
SEC Files Suit Against Georgia Advisor Over Misappropriation of Client Funds

The Securities and Exchange Commission (SEC) is filing suit against a Georgia-based advisor, Christopher Burns, who allegedly misappropriated client funds.

August 5, 2022
SEC Fines RIA $5.8 Million Over 12b-1 Fee Infractions Tied to Wrap Accounts

The Securities and Exchange Commission (SEC) has imposed a $5.8 million fine against Private Advisor Group over 12b-1 fee violations tied to its wrap fee program. 

August 4, 2022
North Dakota Regulators Seek to Close Down Advisory Firm Selling Crypto and Weed Products

The North Dakota Securities Commissioner’s office is seeking to shut down a small West Fargo-based registered investment adviser (RIA) after its owner allegedly violated state securities laws and improperly took custody of $17.8 million in client funds beginning in 2017.