Two major bank-owned wirehouses, Merrill Lynch and Smith Barney, are tweaking their grids in an attempt to weed out weaker producers, confirms Howard Diamond, managing director of recruiting firm Diamond Associates in Chester, N.J.

It's a matter of cutting costs, he explains. "It's all economies of scale. It costs less to support one $1 million producer than it does to support three $350,000 producers" in terms of marketing, sales assistants and general overheads.

The tweaks raise the bar under which advisors find themselves in the "penalty box." Merrill Lynch will now pay a flat 25% for advisors with more than six years of service who are producing less than $300,000. Formerly, the 25% minimum applied to 10-year veterans producing $200,000 or less. Now, six-year vets doing less than $200,000 will earn commissions of just 20%.

Smith Barney's plan would drop nine-year-plus advisors' payout to 30% from 37% on anything between $300,000 and $350,000, and lower the payout to 20% from 25% to 27% on anything less than $299,999. It is also instituting account minimums of $75,000 for transactional business and $25,000 for advisory accounts. Advisors who don't hit those minimums won't be paid for the accounts.

Most advisors, especially those in metropolitan areas, can't live on payouts at this level, Diamond says. To compound their misery, advisors in the penalty box can expect a general lack of support, no travel and expense allowance to entertain clients) nor access to sales assistance.

Having already suffered through the uncertainty of mergers and write-downs, changes to the grids are proving the final straw for many advisors whose production levels weren't high enough to land them on their firms' love lists, Diamond says.

As such, many smaller producers are quitting Wall Street's humbled giants and are either considering going independent or heading to banks and regional firms, where a few hundred thousand can be meaningful production. Diamond adds that banks are particularly attractive to rising stars who are good at what they do, but lack the referral networks it takes to build a thriving business, since these referral networks are built into the bank structure.

These wirehouses "are clearly sending a message that they're focusing on higher producers and they don't want those below $400,000." The changes will affect reps at Citibank, but it's still unclear if they will affect Bank of America, whose spokesperson didn't return calls for comment at press time.