The “Low-Value-Client” Label Is Alive and Well in Wall Street Firms

This could arguably be one of the most important topics if you are a bank or credit union that has a financial advice platform or might be considering creating one.

In this blog, we will expose the mindset of most Wall Street firms relating to client labels and why we believe banks and credit unions, with their built-in philosophical approach to customers, have a significant advantage when it comes to driving more wallet share with existing and potential clients and members.

When my 17-year-old daughter went into our community bank to open a savings account, she was quickly ushered into a nice cubicle where a well-dressed, professional young man proceeded to walk her through the entire process, explaining everything that was going on along the way. 

Community banks and credit unions certainly have different levels of engagement for certain customers. But it’s in their DNA to want to bank with anyone willing to walk through their doors – even if it’s with a Ziploc bag with $137.14 in coins and bills to open their first savings account. I’d enjoy watching my daughter go to a local Merrill Lynch office asking to open her first investment account: “I would like one share of Tesla please!”

Wall Street thinks of banks and credit unions as the “B” and “C” players and our argument is that the narrative pushed by them does not have to be.  Banks and credit unions have earned a unique relationship with their customers that takes time and effort to develop. And that relationship can evolve to include the highest levels of financial planning.


Starting in 2021 Merrill Lynch Advisors:

  • will get a 0% payout (not a big number) for revenue generated in households under $250,000. 
  • will receive 2bps instead of 4bps on certain cash products like deposits and CD’s.

I am not picking on Merrill Lynch, which is owned and operated by Bank of America.  Some of the best and brightest Advisors on the planet work for Merrill.  I could provide similar information from nearly every major broker-dealer.  Even Wells Fargo Advisors, who historically has stayed away from complicated comp plans, is implementing changes for 2021 that could punish advisors working with too many sub $250,000 clients.

The 0% or minimal payout for lower-value clients has been the goal for many years now. Firms just had to be patient in their approach. Case in point; in 2012, Merrill introduced a reduced payout of 20% for households under $250,000. Nine years later, they finally arrived at the 0% number.

Let the robo-advisors (internal or external), along with the “B” and “C” level firms work with the “low-value-clients” until they become “high-value-clients”, at which time they will seek out the “A” level firm for their financial planning needs. 

That has been, and still is the unwritten policy at almost every major Wall Street firm and, statistically, most investors do exactly that so who’s to say it isn’t a smart policy, unwritten or not.  In 2020, nearly 80% of major firm Advisors will achieve higher production than they did in 2019. The aforementioned Merrill Lynch reported record client balances of $2.6 trillion for the third quarter of 2020!

It hasn’t always been this way. Prior to the financial crisis, almost all Wall Street firms let their Advisors drive their teams and individual practices in terms of what kind of clients they could work with. As long as they were compliant, they were mostly left alone. Shortly after the financial crisis, firms started changing their comp plans to nudge their Advisor ranks away from what many deemed lower value clients. We aren’t being critical of this policy. In fact, the numbers could not be better today for the majority of firms.  For most of the larger broker dealers, the average new household is well over $1 million in size today. 


Firstly, in the last 3-5 years, there has been a shift in how some very good broker dealers view banks and credit unions. They are pouring resources and capital into developing programs whose sole responsibility is supporting financial institutions as their 3rd party broker-dealer.

Secondly, there has never been a better time for a bank or credit union to evaluate their current advice platform or to start the process of creating one.


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