Merrill’s Experienced Brokerage Force Under 12,300, Internal Reports Show
Merrill Lynch’s force of experienced brokers appears to be significantly smaller than the broad numbers disclosed in its public reports, according to brokers who were given statistics on their productivity rankings last week.
The “thundering herd” of producers championed by Merrill Lynch Wealth head Andy Sieg comprises around 12,290 brokers, below the 14,796 the Bank of America brokerage unit disclosed to the press as part of its fourth-quarter earnings on January 16. Merrill does not break out how many of its brokers are trainees in its Financial Advisor Development Program, which, as at many firms, has high rates of attrition.
Large brokerage firms have historically flaunted the size of their brokerage forces as a key metric for shareholders to use in evaluating asset-gathering and revenue potential. Knowing the exact numbers of experienced advisors gives insight into firms’ ability to retain experienced advisors from quarter to quarter, a number of increasing importance at a time when large firms have cut back on expensive recruiting from each other, analysts say.
A supplement to Bank of America’s fourth-quarter earnings release flaunted a total of 19,459 “total wealth advisors” in its Global Wealth & Investment Management division, including 17,518 “financial advisors.” The division includes Merrill Lynch Wealth and the bank’s much smaller U.S. Trust private banking business. The FA totals include Merrill Lynch trainees, almost 3,000 Merrill Edge brokers and early-career advisors hired from other firms.
Attrition of brokers that Merrill officials calculated at 2.6% of the force in 2018 was near all-time lows, Bank of America Chairman Brian Moynihan said on an earnings conference call with analysts. Large brokerage firms historically have attrition closer to 5%.
A Merrill spokesman said the sub-13,000 “experienced” figure that brokers were shown last week to get perspective on their rankings within the sales hierarchy excludes experienced new hires with less than a year at the company as well as unlicensed trainees.
Experienced advisors at Merrill averaged $1.36 million of revenue in 2018 compared with $1.05 million for its total force, BofA said in its earnings reports. According to two sources who saw the internal ranking summary, a broker producing $2.1 million last year would have been in the top 6% of Merrill advisors while a broker generating just under $116,000 would have been in the bottom 6%.
Merrill is not alone in being imprecise about the size of its advisor force. UBS Wealth Management last week reported 6,820 financial advisors in the Americas (including a small number in Latin America), although brokers said numbers provided in internal rankings put the U.S. figure at 6,320.
Neither Morgan Stanley nor Wells Fargo Advisors—the other so-called wirehouses—break out from their gross advisory force numbers the totals in training programs. Morgan Stanley said its advisor force at yearend 2018 was 15,800 while Wells Fargo reported 13,900 advisors, including those in its Financial Network (FiNet)independent contractor unit.
Consultants said bulk at the large brokerage firms has become less important than in the past as they focus on raising productivity by having advisors in their traditional brokerage groups promote investment services and products to the very wealthy. (Merrill Lynch for years has not paid its Wealth Management brokers on accounts with less than $250,000.) UBS executives in October said that they were no longer aiming to employ between 6,500 and 7,000 brokers in the Americas.
“Headcount at the wirehouses is tightening, and that’s in some ways by design,” said Alois Pirker, research director at Aite Group, a consulting firm to asset management firms that distribute products through retail brokerages. “The goal is to get a highly productive group, but not the largest group.”
The size of the retail brokerage forces at the four wirehouses has declined by more than 14% to 54,400 from almost 63,000 at the end of 2007, Pirker said.