Merrill Wealth Slowly Eases Out of Covid Slump
Bank of America issued a mixed third-quarter report card for Merrill Lynch Wealth Management on Tuesday, saying revenue fell by 7.5% from the 2019 period but inched up 3% from the second quarter when advisors and clients were coping with the initial constraints of the Covid-19 crisis.
Net income at the bank’s Global Wealth & Investment Management division, which includes more than 14,000 Merrill Wealth advisors and about 1,900 BofA Private Bank advisors, fell 32% from the year-earlier quarter to $749 million. The profit was up 20% from the second-quarter doldrums.
Cratering net interest income in the division caused by rock-bottom rates more than offset higher asset management fees in the wealth division. BofA CEO Brian Moynihan said on an earnings call that the wealth division is furthering its goal of generating more bank loans and deposits, in addition to traditional investment revenue.
Referrals between Merrill brokers and bankers rose 17% in the first three quarters from the same 2019 period. Average deposits from market-wary wealth clients grew 15% from a year ago during the quarter, and average loans jumped 9% to $186 billion, the bank said.
The wealth businesses produced 22% of Bank of America’s total quarterly revenue of $20.5 billion—the second highest of its four business divisions, after consumer banking—and 15% of its $4.9 billion of net income, the smallest division contribution.
Merrill Wealth and the Private Bank ended the quarter with record-high client balances of $3.1 trillion, a 6% jump from the year-earlier third quarter on higher market valuations and client flows, but efforts to attract new client money to fee-based managed accounts lagged.
“Net client flows” across the division fell 61% to $1.39 billion from the second quarter and were 75% lower than the $5.52 billion advisors attracted in last year’s third quarter.
“There has been some slowing in household acquisition activity,” a senior Merrill executive told reporters on Tuesday, but indicated no plans to rescind the carrot-and-stick compensation plan introduced three years ago to incentivize advisors to grow their books.
The “growth grid” adds, deducts or maintains payout percentage points on broker revenue grids based on net new households and new assets. (Plans to raise the new household bogey to four accounts this year from three to avoid a penalty were canceled in June to accommodate lock-in challenges of the Covid crisis.)
The compensation scheme remains “remarkably strong,” with advisors averaging almost four times the new household results they were achieving before introduction of the growth grid, the executive said.
Merrill advisors attracted about 17,000 net new households in the first three quarters of 2020, compared with 28,000 in the comparable 2019 period, according to a spokesperson.
The Merrill executive credited Private Wealth Management advisors—about 200 broker teams generally servicing clients with $10 million or more of assets—with having had particular success in attracting assets during the Covid-19 crisis. Average per-account assets of Private Wealth clients are $33 million, said the executive, who spoke on condition of anonymity.
Bank of America no longer breaks out the distribution of advisors among its core Merrill Wealth, Private Wealth Management and Merrill Edge units, but the executive said that 75% of Merrill’s traditional brokers are producing more revenue this year than last and over 60% “are having the best years of their careers.”
Merrill Wealth President Andy Sieg has eschewed hiring experienced brokers from competitors to replace retiring or departing advisors for the last three years, and last month introduced a new development program to train wealth management brokers from within Bank of America.
Merrill’s expenses during the third quarter rose 3% from the year-earlier period to $3.5 billion on “higher revenue-related incentives” for advisors and spending on new digital projects such as a Personal Wealth Analysis tool that generated more than 150,000 financial plans during the third quarter, the company said.
In the earnings press release Andy always likes to brag about having the most advisors in the top advisors lists for Barron’s, Forbes and other publications. He might also want to also show how many on those lists he INHERITED and how many HAVE LEFT since he took over. He would really a leader in those categories! Let’s see, attrition is low and the majority of FA’s are having their best year ever – but net income is down 32% from a year ago. Doesn’t quite add up, Andy!!!
there is one advisor on the top 10 at ML on the barrons list
2020 Top 100 Financial Advisors
The 17th edition of our annual Top 100 is based on quantitative and qualitative measures, including advisors’ assets and revenue, their regulatory records, and more.
2020 Rank 2019 Rank Advisor Firm Location Retail (Up to $1 mil) High Net Worth ($1-10 mil) Ultrahigh Net Worth ($10 mil+) Foundations Endowments Institutional Team Assets ($mil) Typical Account ($mil) Typical Net Worth ($mil)
1 1 Lyon Polk Morgan Stanley PWM New York • • 27,250 50 150
2 2 Gregory Vaughan Morgan Stanley PWM Menlo Park, Calif. • • • • 24,765 75 150
3 3 Andy Chase Morgan Stanley PWM Menlo Park, Calif. • • • • 45,968 10 30
4 4 Mark T. Curtis Morgan Stanley Graystone Palo Alto • • • • • • 116,999 15 30
5 5 Brian Pfeifler Morgan Stanley PWM New York • • • • 13,700 50 100
6 11 Richard Saperstein Treasury Partners New York • • • 16,250 25 30
7 6 Karen McDonald Morgan Stanley Wealth Management Palo Alto • • • • 78,963 3 10
8 7 Jeff Erdmann Merrill Private Wealth Management Greenwich, Conn. • 9,713 40 60
9 9 Mark Douglass Morgan Stanley PWM Menlo Park, Calif. • • • • 24,765 75 150
10 14 Ron Basu Morgan Stanley PWM New York
And don’t forget the 17,000 new households! Seems like a lot of work adding 17,000 households for a 32% decline in new profits!
A client with 1mm dies and the money is divided between her 4 kids. ML counts it as 3 new plus 250k households. Glad to be out of the nonsense.
“Bank of America no longer breaks out the distribution of advisors among its core Merrill Wealth, Private Wealth Management and Merrill Edge units”
why would BofA want us to know what is going on. “The times are a changing”- I do miss the old days
How can average per advisor production be up slightly and net income be down 32%….that doesn’t make any sense.
Until you realize that $43,000,000,000 worth of teams have left Merrill so far this year. That’s a lot of inherited accounts to pass out. Even if those still at Merrill collect fees for a month or two until the ACAT comes in, they are going to have their best year and per advisor production increases.
Because more newbies are teaming up more with senior advisors. Easy way to go from an average household of $250k to $3M in 1 day and distort the optics..
Advisors at Merrill, those who have experience and have continue to stay at the company, continue to work to bring in new clients. However, MANAGEMENT continues to lose advisors which in turns loses clients. Based on advisor hub, Merrill is nearly double to losses of the next competitor. Based on averages, they are costing advisors 2 hh per year. I blame management for not creating an atmosphere for wanting to stay with the company. Because of management losses of advisors, the rest of the advisors are forced to try and and make up the difference.
The asset loss is accelerating at the Bull. 2017 -$29b 2018 -$22b 2019 -$34b 2020 -$42b.
Can’t wait for the new grid next year and the year after. Merrill is ready to spring their trap of salary + bonus soon.
I am calling BS on this. It isn’t going to happen like that nor that soon. Experienced advisors will have grid and that will remain. The transition to salary is likely going to continue but over a 10 to 20 year period and only for new hires, like those coming from Edge or hired in a salary position to inherit clients. I see complaints all the time on here about salary when it will never impact those who are top quintile producers. I also see complaints that “young advisors” in the training program have no chance of making it – but that everywhere. The fact is young people coming into any business are less entrepreneurial, don’t like to take risk, would prefer the safety net of a salary and 9 to 5 job, and want clients given to them. The future of the business for those who can gather new assets will always reward those who are willing to go out and knock it out of the park on their own. RIA’s will continue to serve that type of advisor, particularly in the future, and that advisor will make more money – also taking on the risk of owning a business just like any business. On the flip side, the advisor that wants the security blanket of a big bank, salary and bonus will best be served never making as much as they could have, but never willing to work hard enough to achieve success on their own. Salary and bonus will serve the millennials well. That is what they want anyway. You can run a business with both advisory paid advisors and salary advisors at the same time.
Experienced advisors are too fat and old to do anything to fix the sinking ship. It’s sad.
Disagree on salary and bonus in 10-20 years will happen much sooner along with Brian insisting that ml generate margins like UST
From senior folks at Edge there are approximately 4000 financial solution advisors imbedded in the organization now. The median age of traditional advisors is in the low to mid 60’s and they are CTP eligible which places great restrictions on the younger advisor soliciting their clients if they leave in the future. Finally they are not hiring