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.