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 receive a cut equal to 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%. From lowest to highest, Merrill’s payouts currently range from 34% to 51% for advisors working with non-small households.
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Merrill wants advisors devoting time to bigger households
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.
Andrew Tasnady, a compensation consultant and founder of Tasnady & Associates, said Merrill was a pioneer among firms that opened call centers to work with clients with relatively low asset balances. The goal was to ensure financial advisors were dedicating most of their time to working with big households and wealthy investors.
“And they’ve been cajoling their advisors through penalties and incentives to move smaller clients over to the service center,” Tasnady said. “Merrill’s really spearheaded that whole effort, and other firms have followed to various degrees. It’s really had a positive impact on advisors being able to do a better job servicing the larger clients.”
Merrill isn’t the only firm to announce changes this year to its payouts for working with small households. Morgan Stanley said last week that starting in 2026 it would pay advisors nothing on revenue generated from households with as much as $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.
Tasnady said that most advisors today are already working with households with at least $1 million to manage. He said complications can arise when prominent clients want to bring in younger relatives with smaller account sizes. That’s one reason many firms allow families to group their accounts together into larger households that can more easily meet advisors’ AUM criteria.
“And doing all this encourages advisors to focus on large accounts,” Tasnady said. “And advisors can only become large by having a handful of large, say, $100 million-type of accounts,” he said. “The mathematics just don’t work if they have too many small accounts, which they can’t possibly service.”
Changes to banking, growth incentives
Merrill meanwhile is also boosting its incentives to encourage advisors to steer investors to banking products. Since 2024, Merrill advisors who have at least 55% of their client households in Bank of America checking accounts have qualified for what the firm calls its banking growth award.
Advisors qualifying for these awards will be able to receive additional credits for revenue production equal to 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 revenue credits will be calculated at the end of 2026 and will help advisors move up the firm’s payout grid the following year.
The firm meanwhile is reducing certain incentives it offers through its Merrill growth awards, which are used to reward advisors for bringing in net new households and assets. Merrill now credits advisors who qualify for the growth awards with an additional revenue equal to 0.12% (12 basis points) on anything up $50 million into various types of accounts. Beyond that $50 million threshold, the credits are awarded at a rate of 0.03%.
Starting next year, advisors will receive 0.02% (2 basis points) in revenue credits on money moved into those types of accounts. The 0.12% rate will remain in place for money moved into other types of accounts, including advisory accounts.
Many firms staying the course on pay in 2026
The changes come after a year in which Merrill made virtually no changes to its broker compensation policies and two years after the firm eliminated a widely unpopular “growth grid” that awarded advisors for adding new households and new assets but also penalized those who failed to reach those goals.
Jeff Feldman, the founder of Financial Recruitment Partners, said the biggest complaints he hears from Merrill advisors have less to do with compensation and more with bureaucratic constraints. Members of senior teams, for instance, can still struggle to hire support staff.
“A lot of the decision making has been pulled out of the hands of local management,” Feldman said. “To get an answer on something, you have to go through multiple layers for approval.”
Merrill is the third of the major wirehouses to announce its compensation policies for 2026, following Morgan Stanley and UBS. The only one left is Wells Fargo.
Firms so far have been at either pains to keep changes to a minimum or, in UBS’ case, modify pay policies in a way that will only be a benefit. Tasnady said firms that stay the course on compensation usually do so to avoid upsetting advisors, who tend to value consistency in their pay.
Merrill’s plan for next year, he said, seems unlikely to cause much consternation.
“They didn’t change their grid payouts, and they didn’t do a grid stretch,” Tasnady said. “This shouldn’t be interpreted as a major change. That puts it in line with what most firms are doing.”
– This story has been updated with insights from industry experts.
