First Union Securities

After using two separate payout plans, First Union's full-service retail brokerage revised its broker compensation scheme this January to reflect the successful integration of Wheat First Union and Everen Securities, its predecessors. (The Charlotte-based First Union's bank brokerage unit remains a separate division.)

Payout*	Levels	Payout
Agency, principal equities	First $100	26%
(based on ticket size after discount)	More than $100	41%
Mutual funds, annuities, insurance	First $2,500	36%
(based on monthly gross)	Above $2,500	42%
Consulting services and trusts	First $3,000	40%
(based on monthly gross)	Above $3,000	42%
Hard-dollar fees (for mutual fund trails, money market referral fees)		42%
Lending		42%
Capital markets finders' fees		67%
Commodities		30%
* based on monthly gross per category

First Union brokers also are eligible for monthly bonuses based on the schedule below:
Monthly Bonus Schedule
Monthly Commissions	Bonus
$0-$11,999	grid minus 14%
12,000-15,499	grid minus 10%
15,500-17,999	grid
18,000-22,999	grid plus 2%
23,000-27,999	grid plus 3%
28,000-33,999	grid plus 4%
34,000-44,999	grid plus 5%
45,000-57,499	grid plus 6%
57,500-plus	grid plus 7%
Source: Internal First Union documents, confirmed by firm

The new plan melds Everen's trade ticket payout and its penalty box, or "discount sharing," matrix with Wheat First's monthly commission-based grid. The new plan reduces the old top payout at Wheat from 45 percent (and even 67 percent for seldom-paid finders' fees for derivatives) to 42 percent. To this, it adds up to 7 percent in monthly bonus, borrowed from Everen's old grid, plus 5 percent that's put away in deferred comp.

The "discount sharing" aspect of the plan means that brokers earning from zero to $12,000 a month in commissions take home grid commissions minus 14 percent. From $12,000 to $15,499, the rep earns grid minus 10 percent. At $15,500 to $17,999, the broker earns the grid; above that she earns a monthly bonus that ranges from 2 percent to 7 percent depending on production.

As part of the new plan, First Union brokers, their spouses and dependent children receive discounts of up to 80 percent on brokerage and consulting services. In addition, brokers and their spouses are not charged fees on self-directed IRA accounts.

Also as part of its new schedule, First Union created two deferred comp plans - the Bonus Contribution Deferred Compensation Plan and a Voluntary Deferred Compensation Plan. The first lets First Union put away money for brokers who produce more than $350,000, and then defer that pre-tax income for four years. The company contributes between 1 percent and 5 percent of the financial consultant's gross, and the consultant can elect investment options for the funds. Vesting is over four years, starting Dec. 31 each year, and consultants can take distributions after each year's contribution vests. Full vesting occurs upon death, disability or retirement, if a broker has met age and length of service requirements.

Merrill Lynch

For 2001, Merrill Lynch is retaining the payout grid it created in 1999. But that's about all of Merrill's retail marketing efforts that has remained the same. Last year, Merrill installed E. Stanley O'Neal as head of its private client group, and he restructured the group, cut back on division directors, and lopped off more than 1,800 marketing and support staffers.

In two symbolic and popular moves, O'Neal eliminated the Masters contest for bringing in new planning business, and abandoned the requirement to sell $250 Financial Foundation financial plans. He also raised the minimum production needed to qualify for recognition clubs.

To reward fee-based producers, the firm is paying brokers monthly rather than quarterly for mutual fund sales. Merrill is also compensating brokers for the difference in fees paid on old Asset One accounts (1.5 percent) and the Unlimited Advantage accounts (1 percent) introduced in 1999. Merrill will pay brokers the 50-basis-point difference until June - half in cash and half in deferred compensation.

On the other hand, in January, the firm stopped paying brokers for trades in accounts with balances less than (cont.)

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