Merrill Edge Assets Continue to Soar
Bank of America, which has been hyping the rich vein of brokerage wealth to be tapped in its more than 4,500 branches, gave its 10-year-old discount brokerage unit a gold star this week over the progress it is making.
Assets under management of the Merrill Edge unit of its consumer bank have climbed 55.6% over the past three years, including a 22.4% jolt in 2017 alone. Assets of the largely self-directed and robo-advised customers at Edge totaled $177 billion at the end of 2017, and rose another $5 billion in the first quarter.
“Just phenomenal growth,” Dean Athanasia, president of consumer banking at the second-biggest U.S. bank company, said at Morgan Stanley’s Financial Services conference in New York on Tuesday. “That growth is just demonstrably going up in a multiplier effect, and it keeps going.”
The Edge unit, to be sure, pales next to the $2.31 trillion of customer assets sitting in the coffers of the full-service Merrill Lynch Wealth Management business. But as Merrill Wealth executives have repeatedly said, it is much harder to show growth at the mothership than at its speedboat cousin. Assets under management at Merrill Lynch Wealth grew 9.7% last year, and 13.4% over the past three years.
Merrill’s almost 15,000 brokers generated on average less than one one net new household a year in 2017, a worrisome metric that spurred firm executives to put growth carrots and sticks into the firm’s 2018 compensation plan and create “recognition” seminars in resort locations for top generators of new household accounts.
According to Athanasia, there is nothing but daylight ahead for growth at the Edge unit, which currently services just 15% of Bank of America’s 67 million consumer banking customers.
Bank of America continues to plow money into expanding its no-frills brokerage unit, which plans to hire about 300 Merrill Edge “financial solutions advisors” this year and add 600 “Investment Centers” in bank branches by 2020. Edge had 2,538 advisors at the end of March, up by more than 400 from a year earlier.
Like other wirehouses that have been trimming their recruiting budgets, Merrill Wealth’s advisor headcount grew 1.8% over the 12 months ending March 31 to 14,829. Merrill pays its brokers only on accounts with more than $250,000 in assets, another spur for them to refer lower-level accounts to Edge.
Bank of America also has embedded its “robo” service called Guided Investing into the Merrill Edge business. Merrill brokers have fueled some of the robo’s growth by referring retirement customers who want commission-based individual retirement accounts to Edge. Merrill prohibited such accounts 18 months ago in anticipation of the Department of Labor’s fiduciary rule that is now all but moribund.
The Guided Investing product at Edge is attracting around 1,050 new accounts weekly, up from around 300 when the service was launched in February 2017, Athanasia said. The average Guided Investing account has also grown by about 75% over the same time, according to slides accompanying his presentation.