Merrill Slows Broker Attrition, Keeps Focus on Internal Growth: Exec
After a jump in the number of departures earlier this year, Merrill Lynch Wealth Management’s competitive advisor attrition slowed in the third quarter to a 3.9% rate, in-line with historical averages 4%, according to a senior executive.
That was down from 5% in the second quarter when Merrill Lynch President Andy Sieg acknowledged on a call with the firm’s brokers in July that losses were “higher” in the second quarter “than we’d like to see.” In the third quarter, the return to offices, which reopened in June after pandemic shutterings, has helped to reduce some departures according to the senior executive.
“That reconnected advisors to the energy of Merrill Lynch and Bank of America and was very positive from an advisor retention perspective,” said the executive, who spoke to reporters during a conference call after its parent Bank of America released earnings for the quarter ending Sept. 30.
At the same time, the senior Merrill executive reiterated that the firm plans to adhere to its strategy laid out four years ago to focus on internal growth rather than hiring from the competition, even as rivals stepped up their recruiting efforts.
“We are fully focused on organic client development and organic talent development,” said the executive.
The number of frequent job hoppers who constituted a large portion of the earlier departures also declined slightly, according to the executive. (Sieg, who has been on a nationwide tour visiting offices as they reopen, two months ago introduced a campaign called Project Thunder aimed at addressing advisors’ pain points.)
The slowdown did not surprise one recruiter who said it coincided with a seasonally slower third quarter as brokers took end-of-summer family vacations.
“Merrill had a respite,” said Phil Waxelbaum, an industry recruiter based in Scottsdale, Arizona.
Overall, 18,855 advisors were on the roster at Merrill and BofA’s wealth management division, down 8% from the prior year and 3% from the prior quarter, according to the company. The firm stopped breaking out the number of traditional Merrill brokers separately from its thousands of private bankers and consumer bank-based Merrill Edge advisors.
Despite the headcount declines, Merrill’s revenue rose to a record $4.47 billion, the company said. Client balances also hit a high of $3.1 trillion, up 21% year-over-year. The increases were driven by higher asset management fees, loan and deposit growth and new account growth, the executive said.
BofA Global Wealth and Investment Management unit, which also includes Bank of America Private Bank, reported total client balances of $3.7 trillion, up 20% year-over-year driven by market increases and net advisory “flows” of $14.7 billion.
The global wealth unit’s record revenue of $5.3 billion, which was up 17% year-over-year, and its 31% pretax margin likely caught the attention of Bank of America Chief Executive Brian Moynihan who predicted impressive future growth for wealth management on the company’s earnings call with analysts.
“The opportunities in the consumer business and wealth management business just in the U.S. are staggering to us,” Moynihan said in response to a question about the bank’s plans to expand internationally. “There’s just so much opportunity to distract ourselves, this would not be the time to do it. We’re in a war with the competition and we’re winning.”
Merrill, which has promoted asset gathering through carrot-and-stick “growth grid,” said brokers added a net 4,200 net new households in the year and 16,600 so far this year, relatively consistent with 2020. Roughly 430 of those new households had more than $10 million in assets, a larger portion than in prior years, the executive said.
And while broker headcount has been on the decline, the Merrill executive said the goal is to reach “single digit growth,” a number that would be possible in the next five to 10 years as it expands its training program.
The training program, which was revamped in June and draws brokers from consumer bank roles, now has 750 participants at Merrill and will grow to 2,000 in the next 18 months with the expectation of graduating 1,000 (at an 80% rate) on an annual basis, according to the executive.
The targeted numbers aren’t set in stone, however, he said.
“We’re focused more on outcomes than we are the number of advisors in the program,” the same executive, who reiterated comments made by other Merrill executives about the goal to have the new advisor path bolster the wirehouse’s diversity and inclusion efforts.