Merrill Touts Success of Growth Strategy in Pandemic-Afflicted Year

Revenue at Merrill Lynch Wealth Management fell 5% in the final quarter of 2020 but results continued to improve from earlier in the year as client assets hit a record and net flows climbed back near Covid-19 pandemic-related disruptions.

Quarterly revenue of $3.85 billion at the Merrill Wealth unit, which accounted for 80% of its Bank of America parent’s Global Wealth and Investment Management division, was up 3% sequentially as executives said that Merrill’s internal “growth” strategy was continuing to pay off in terms of growing assets and lending, particularly in the second half.

Merrill brokers added 22,000 net new households for all of 2020, including 5,000 in the fourth quarter as brokers re-focused on prospecting in the back half of the year despite pandemic-related prohibitions on in-person meetings, the company said.

“Despite the virtual environment and inability to have face to face meetings—and inherently the wealth management business is a face-to-face business—household growth continued to accelerate in the second half of the year,” Bank of America Chief Executive Moynihan said on the company’s earnings call, noting it was a record year for new $10-million plus clients across the division.

The 22,000 new-household metric compared with 35,000 that brokers attracted in 2019 but was four times greater than brokers added in 2017 levels. To prod new accounts, Merrill introduction its carrot-and-stick “growth grid” in 2017 at the same time it halted veteran broker recruiting.

“It clearly underscores the way that the organic growth tempo of the business has increased,” a senior Merrill executive said in discussing the firm’s results. “Over the last three years alone, we have grown our business by a cumulative 85,000 net new households.”

The executive highlighted improvements in markets such as “Greater Detroit” and particularly the “Gulf States” in Alabama and North Florida where advisors added a net 640 households in 2020, up from just seven on a net basis in 2016.

That push, coupled with rising markets, lifted Merrill client balances 10% to a record $2.81 trillion–including assets under management and loans and deposits. Brokers added a net $7.6 billion in assets under management in the fourth quarter, below $8.1 billion in the fourth quarter of 2019 but well above $1.3 billion in the third quarter of 2020.

Overall, quarterly profit in the Global Wealth & Investment Management division was down 19% year-over-year to $836 million as expenses rose. Pretax profit margin fell to 24% from 28% in the fourth quarter of 2019 but improved from 22% in the 2020 third quarter.

The total number of advisors at Merrill and Bank of America’s mass-affluent Merrill Edge unit fell by a net 429, or 2.5%, to 17,331 over the last three months and was down slightly from 17,458 year-over-year. (Merrill since 2019 has not broken out the number of core wealth brokers from roughly 3,000 in the Edge unit.)

But the Merrill executive attributed departures to peripatetic brokers, noting that four out of five of those departures had been previously recruited to Merrill from other firms.

“In other words, those advisors who had departed now have three or more firms on their résumés,” the executive said. “This dynamic reaffirms for us the commitment to organically growing our advisors and helping them to achieve long-term career success at Merrill.”

Merrill’s attrition rate also improved slightly from 2019 to just under 4% last year, and the goal is to see low single-digit growth in the advisor count annually primarily driven by its in-house training programs, the executive said.

The ranks of top performers at Merrill expanded last year as 3,800 advisors achieved more than $1 million or more in total revenue for 2020, slightly above the 3,700 who hit that mark in 2019. Over 700 generated $2.5 million or more in commissions.

Firm-wide average revenue per advisor rose 5% to $1.170 million from $1.108 million a year ago and was up from $1.125 million in the third quarter, the company said.

Brokers also continued to sell the Bank of America franchise, opening 107,000 bank accounts for wealth customers last year. Referrals between Merrill brokers and bankers rose 9% in 2020. Average deposits from market-wary wealth clients grew 20% from a year ago to $306 billion during the quarter, and average loans jumped 7% to $187 billion.

Merrill has also “significantly increased” the number of wealth management bankers helping advisors pitch clients on Bank of America products and now has 500 assigned to wealth branches across the country, up from 300 mid-2020. The firm also in September introduced a new Advisor Development program to train wealth management brokers from within Bank of America.

The senior executive confirmed that Merrill is maintaining its pause in cold calling in its training program and is rolling out a new prospecting strategy in coming weeks that will largely do away with the practice, the senior executive said. The firm suspended trainee cold calling earlier last year after finding some do-not-call policy violations by neophyte brokers working from home.

“We are going to be in position to very successfully develop new advisors with far less reliance on cold prospecting via phone calls,” the executive said.