Merrill’s New Household Growth Fell 40% in 2020–Sources
(Corrects “net” account additions in 2019 to “gross” in final graph.)
[Editor’s note: Following this story, Merrill reported in its fourth quarter earnings on January 19 that it added a net 22,000 accounts in 2020 when factoring in the final end-of-year additions.]
Merrill Lynch Wealth Management told brokers last month they performed well in generating new accounts for the firm, despite bringing in about 40% fewer households than in 2019.
That’s well below the 35,000 newcomers they added in 2019 but Sieg, a longtime proselytizer for productivity growth at a time when Merrill has curtailed recruiting, was congratulatory.
“What an amazing pivot to household acquisition in this environment,” Sieg said on the call. “According to an industry benchmarking survey we are going to drive more growth than competitors.”
A Merrill spokesman declined to comment, saying the Bank of America wealth unit could not discuss performance ahead of reporting earnings next week. Account growth totals may have climbed slightly higher in the closing days of the year after the call.
Sieg gave his growth performance assessment during his discussion of Merrill’s 2021 compensation plan, according to people on the call.
Sieg introduced Merrill’s carrot-and-stick “growth grid” in 2018, going further than direct competitors by adding or subtracting percentage points to brokers’ standard payouts based on new accounts and assets they generate. He was motivated by sluggish numbers. In 2017, Merrill attracted only about 7,000 net new households, with the average broker opening fewer than one account on a net basis (subtracting clients who left the firm).
Merrill raised brokers’ growth targets in 2019 and 2020, but modified the 2020 plan in June to acknowledge the effects of the outbreak of Covid-19 on broker prospecting.
The new account requirement was lowered to three households from four, and remains at the lower level for the 2021 plan. (The growth grid also adds and subtracts payout points based on growth of client assets, deposits and loans.)
On a gross basis, Merrill Wealth Management’s approximately 14,000 advisors were on track to add some 50,000 households in 2020, Sieg said on the December call. The total plummeted to about 20,000 on a net basis, including customers who closed their accounts.
Sieg congratulated advisors for their persistence in pursuing “responsible growth” after the slowdown in the first half of the year as they adjusted to the work-from-home constraints of the pandemic.
Unlike UBS, Morgan Stanley and some other competitors, Merrill has not opened any of its branches to advisors and prohibited brokers from meeting clients in person until late in the year.
Under the current growth grid, advisors who sign fewer than three net new accounts lose 1% from their revenue-based payout, stay at grid equilibrium for three to five additions, and get a 1% payout hike if six or more households are added.
Although the net household number is the money figure, Sieg tipped his hat to advisors’ overall outreach efforts.
More than 2,000 added seven or more household accounts on a gross basis in 2020 as of mid-December, he said, and about 5,700 brought in at at least three. Merrill’s average advisor in 2019 added 5.5 households on a gross basis.
I am grateful for the 12 years I worked at Merrill Lynch. I am significantly more grateful for the 2+ years I have had so far at Commonwealth.
I left ML this year, was a multi million FA, and I took about 130 HH’s from ML.
Article said 50,000 GROSS households were opened — my guess is 25% of those were a result of gamesmanship. Article also said 20,000 net new HH’s were obtained. That means 30,000 HH’s left, and my guess is that at least 75% were due to departing ML FA’s. 130 here (what I took), 130 there, they add up quickly.
So if 25% of the 50k new HH’s were “fake HH’s”, and 30,000 left ML, you truly had very few new HH’s. That explains why profits and revenues are down, but of course Seig blames it on low interest rate spreads.
ML will continue to pressure FA’s to open new HH’s to make up for the many holes in their bucket.
Glad I’m gone.
What is a fake household. I am at Merrill and would love to get extra households
One way is that if a patriarch/matriarch dies and you move those monies to 4 kids then you’ve got 4 new households with the same assets. The guy is right, our numbers never really add up.
I would bet that a vast majority of the new HH’s are 401k plan participants who just rolled over into an IRA.
For every rainmaker in a ML office there are 20+ advisors who didn’t land a single new, real client in 2020.
I am enjoying going to my office if I want and meeting with clients that desire to meet. Had amazing lunches the last two days with clients. And can’t imagine dealing with the “suits” on grid and sales goals.
In 2020, at our RIA, we had a great year acquiring new clients! Most came from from ML, as tough, confusing and dangerous markets are always a catalyst that force clients to accept that their situation is over their current advisors’ heads’.
My guess as to why the steep drop in new HH’s…..being as candid as can be…. is because the advisors have already gone through all their “creative” re-house-holding to concoct as many “new” relationships as they could over the past two years. Eventually, it catches up to everyone that they must now go find actual, authentic new HH’s greater than $250k. And after many decades at the firm, the statistics are pretty evident.. seasoned, very busy advisors average one to two net new clients a year. That stat has been around for decades. Having been there, many of us are fully aware of all the house-holding games that can and are being played to hit incentive metrics and influence comp. None of these incentives will lead to the right kind of advisor behavior in the long run, and as happened at Wells Fargo, often lead to bad behavior. Buffet always states that employee behavior is driven by their financial incentives. Rather than ML focusing on comp for new HH’s, if the advisors were incentivized to deliver superior service and investment results, which lead to high client retention, than they wouldn’t need to worry about finding new HH’s! They would be flooding in the doors from the many referrals of delighted clients! That’s how we have always grown! Clearly Buffet missed the “incentives” put in place at Wells, and appears now he might just be missing them at BAC.
Where does 14k FA’s come from? We ended last year with 10.9k and now our system shows 12.2k, the numbers are being gamed to paint a rosy picture. Morale is at an all time low. They hired a BAC manager to run the training program and destroyed it by prioritizing activity over results (they tried to mirror bank goals). There is no real vision that FA’s are buying into, we understand it’s them vs us and our clients.
I don’t know why you all beat up on Merrill. It is great shop and Andy works hard for us everyday to make sure we all hit that bonus. Our new no contact with prospects and clients policy is awesome. I didn’t have to even use my mask anymore. I particularly like the ability to put money in an expense account that I am not even allowed to use. The new programs in place that now prevent us from using outside reps is particularly helpful since it is obvious that my fiduciary compass could be off course by a free lunch. The commitment to social justice programs is also something all my clients care about. What more could I want from such a great management group.
Awesome. Excellent narrative. Don’t you just thank your lucky stars for that management help!
I have no idea how much to put in bda since I am in California and might not to go to office in 2021
What’s missing from this story is the fact that ML advisors MUST bring in BofA clients in those HH targets or get a grid clawback. How is that even remotely functioning as a Fiduciary? How does that support any effort at delivering in the “Best Interests” of the client?
There are so many successful Merrill teams. So many men and women that have started with nothing that have become multi millionaires.
The top 2500 people currently employed at this firm that are making over 500,000 a year. And the top 500 are making over 1.5 million. The the medium person that is at the firm over 10 years makes 350,000. There are over 300 advisors at the firm that manage over a billion dollars on assets.
46 percent of all Merill advisors had there best year last year on top of having there best year the year before.
211 advisors over the age of 55 with an average length of service of 23 year took a retirement package. That retirement package had a medium pay out of over 2 million dollars . And 181teams across the firm got those assets and will continue to share on those fees that the clients pay.
Less than 3 percent of advisors left the firm last year. The medium new account opened at the firm was over a million dollars.
Merrill has been incredible opportunity to so many people. My sincere advice to those that are getting in this career is too keep your head down follow the firms leadership and when you pick you heads up you 10 years down the road you will have helped so many people and created wealth beyond your expectations.
Wishing everyone a wonderful 2021
Never worked at an RIA or another wire house. Have been with Merrill for the entirety of my career which began in 2008.
Yes, there’s plenty of BOfA and corporate BS to deal with. Yes, incentive programs don’t align with fiduciary standards as I interpret them. Yes, there’s grids and rules.
But at the end of the day, to think that someone in their mid 30’s can make nearly a million dollars a year while working with clients they know, care for, trust is a blessing.
I truly don’t believe that I could have built the business I have anywhere else in the industry.
For all the nonsense we deal with there’s a ton of tangible benefits to offset.
Cant say I plan on being a lifer, but at this point I’d like to focus more on growing and scaling my business versus running the shop. Someday an RIA may make sense, but right now, I can’t see any more compelling opportunities for what I’m looking to do than Merrill.
There’s no better platform to scale a practice these days based on what I can see.
I’m clearly not alone in this belief when I look around the halls of my office (that I used to be allowed to go into).
If you stared in 2008, you never worked for Merrill Lynch.
Fair enough. Maybe that’s a good thing in terms of maintaining the perspective I have? Less time focusing on what was means more time focusing on what could be.
Awesome story. Extremely happy to here this success. This is just examples of someone that started with nothing that’s making over a million dollars on just 12 short years.
If your another example please share your story.
My story is I built my business at the old Merrill and got out and watched my business flourish. Your growth and your success is because of you and your wonderful clients. Bank of America spends their time trying to get in your pocket or your clients. Clients know this too—That is why they appreciate you more when you leave. Give yourself the credit, not Bank of America.
Another great example of someone that became widely successful starting there practice at Merrill. This gentleman took a chance and went to work somewhere with a very low salary and was able to make something happen. The firm provided him with enough support to get up and running. After a period of time he make the decision and took the risk to leave and take his clients in another direction. There are thousands of extremely successful people that left and there are thousands of people that are extremely successful that have made the choice to stay.
Please share your story with us. Let’s all find some common ground. What’s good for one person in not good for someone else . Like Dan Tully used to say “that’s why there are 31 flavors of ice cream”
Have a great day and thank you for taking the time to read my comments.
Congrats to all the rainmakers on this thread. My personal opinion is you would have been or will be successful anywhere. Here are some facts. If you do a million you are doing more than 80% of all Merrill FAs. Don’t believe the spin. Head count increases dramatically, attrition of giant FAs increases dramatically, average production goes up. Sounds weird to me. Most of your clients don’t like BofA. They are there because of you. If you leave they will follow. If you are a book inheritor or legacy bank advisor you probably need to stay.