Hybrid Happening: Merrill FAs’ Clients Up Their Use of BofA’s Self-Directed Platform, Exec Says
Merrill Lynch Wealth Management clients have increased their use of Bank of America’s self-directed platform by 15% year over year, a senior executive said Wednesday.
Although that tally represents only a single-digit percentage of Merrill’s total client base, according to the company, the growth has been significant and steady.
Since 2019, the number of Merrill clients using the self-directed platform has grown by 40%, the same executive said. During the same time, Merrill clients’ assets on the self-directed platform have grown from $24 billion to $45 billion today, the executive said.
The increase in advisor-led/MerrillEdge hybrid clients reflects advisors’ growing “confidence” in the self-directed platform as they “increasingly” present the Edge business to clients with held away accounts, the same Merrill executive said.
Most of the increase over those 27 months is thanks largely to either growth in asset values or inflows from self-directed accounts that Merrill clients had previously held away, according to a source inside the company, who asked not to be named.
But undoubtedly some previously advisor-led assets also moved to the self-directed platform, leaving some Merrill advisors with less revenues flowing from those hybrid clients.
“A move of assets from advisory to self-directed brokerage could shift revenues from advisors to home-offices,” Scott Smith, director of advice relationship at Cerulli Associates, said.
Wirehouse parent companies’ promotion of self-directed platforms, however, protects their overall bottom lines, without severely threatening individual advisors’ pocketbooks, Smith said.
“In most of these cases, the self-directed accounts serve as a long-term complement to the advisory accounts rather than a replacement,” Smith said.
Major players in the advisor-led space, including Morgan Stanley, which purchased E*Trade Financial last year, and, most recently, Citigroup, have embraced the trend favoring self-directed platforms. Earlier this week, Citi unveiled its Citi Self Invest, a self-directed platform now available to its checking account holders before later marketing it to more people.
The presumed goal is to keep the assets under their roof rather than have them shift to rival financial institutions such as Charles Schwab or Fidelity Investments, Robinhood, or one of the other zero-commission self-directed platforms, according to Cerulli’s Smith said.
The Merrill executive highlighted the self-directed platform during a call scheduled minutes after BofA reported that headcount across its Global Wealth and Investment Management Division, which includes Merrill Lynch as well as Bank of America Private Bank and a cadre of Merrill Edge brokers, fell 2.1% from the prior quarter and 5.9% year over year to 19,385.
The shrinking headcount reflected the subtraction of “a small number” of advisor trainees–about 8%–who did not accept positions in Merrill’s revamped training program, which was first unveiled in May with details solidified July 1, the executive said.
“That headcount removal, along with slower hiring over the last several quarters, brought our advisor count down slightly this quarter,” the executive said. Merrill aims to keep advisor population growth to low single digits annually and boost its roster largely through training new advisors, rather than expensive recruiting of veterans, the executive added.
Merrill, however, continues to hire early-career advisors from other firms through its Accelerated Growth Program, which offers recruits a guaranteed annual salary supplementing their grid-based payout–a structure that does not boost upfront loan balances for the firm.
In the second quarter, Merrill hired 65 advisors through the AGP as well as its Community Markets program, targeting more remote population centers, putting it on pace to exceed prior years’ recruitment tallies, the executive said.
Merrill also continues to recruit more seasoned advisors in Florida, where its private wealth advisor teams have grown from 19 at the beginning of the year to 26 now, and the brokerage aims to double those numbers over the “medium term,” the executive said.
Merrill advisors added 6,000 net new households in the second quarter, the company said, reflecting a 6% drop from the 6,400 added in the first three months of 2021, but a 4% increase from 2020’s second quarter.
“Typically, there’s a little softness in the second quarter,” the Merrill executive said.
For the second quarter, the bank’s Global Wealth unit’s flows for assets under management dropped 36% to $11.7 billion from $18.2 billion the prior quarter, the company reported.
But overall Merrill reported revenue of $4.3 billion, up 16% year over year. The Global Wealth unit reported revenue of $5.06 billion, up 1.8% from the prior quarter and 14% year over year. Those revenues were driven by a $656 million increase in asset management fees, or 27%, year over year.
BofA does not break out profitability for the Merrill unit, but net income for the full Global Wealth unit, including the private bank, rose 12.3% from the prior quarter and 59% year over year to $991 million.