Merrill’s New Training Sheds “Sink or Swim Mentality” That Hampered Diversity: Exec
Merrill Lynch Wealth Management’s revamped advisor training program unveiled this week does away with some antiquated practices that made it harder for diverse candidates to succeed, including the notion that a “sink or swim mentality” represents the only way for a rookie advisor to build a client roster, according to the wirehouse’s Mid-Atlantic divisional executive.
“We love those stories. That’s a part of the DNA of the wealth management industry and that entrepreneurial spirit,” she added. “But when we fast forward to today and we think about this next decade and we think about some of the unique challenges and the history and experience of our diverse colleagues, you start to be objective a bit, and honest, and say, ‘Why is there a gap there?’”
The new program slashes in half–to 18 months–the advisor training program’s length and will seed the “vast majority” of candidates from Merril parent Bank of America’s Consumer Bank employees, who are generally more diverse, according to Aaron Levine, president of Bank of America’s Preferred and Consumer Banking & Investments unit that oversees the Merrill Edge FSAs, who briefed reporters on Monday along with Merrill President Andy Sieg.
The “vast majority” of new trainees will come from the bank’s pool of Financial Solutions Advisors who help self-directed MerrillEdge clients. The FSAs hired in the past five to six years have been more than 50% female and 60% nonwhite, Levine said. That compares to Merrill’s current advisor training program participants, which is 30% female, and more than 33% nonwhite, Sieg said.
The trainees in the revamped program will be expected to build their initial wealth-management client rosters largely through bank-referred clients, rather than cold-calling prospects or relying on networks of families and friends, as was true previously, Sieg said.
With the new structure, Merrill is “going to bring new people into the business,” Hans said Thursday on a panel called “Diversity, Equity, and Inclusion in Private Wealth Management.”
Attracting diverse talent is a “moral” and “commercial” imperative given the “bull market for advice” coupled with “the aging population of our advisors,” Hans added, echoing comments Sieg made earlier in the week about the shifting wealth demographics in the U.S.
At a time when developing younger advisors generally represents a challenge, diverse and talented advisors have qualified as a particularly scarce commodity, driven by the perception that barriers to entry existed for them, as well as “a lack of trust,” Hans said. Many prospective diverse candidates have justifiably wondered, “Am I going to be in an environment where I’m going to be successful?” she said.
Merrill aims to allay those fears and, at the same time, “modernize” with its revamping of the advisor training, she said. The new program will help trainees avoid dead ends and, the firm, potential regulatory pitfalls, Hans said. The new program did away with cold calling after the company uncovered a number of potential do-not-call violations in its training program last year and paused outbound dialing.
“A lot of people don’t even have home phones to take a call,” she said. Under the revamped program, trainees will start with a background in banking and benefit from more coaching so they are better prepared to help clients that “have a level of complexity of their wealth, where they need a full-service advisor,” she said.
While not commenting on Merrill’s changes specifically, an industry analyst said a pressing need for more, younger advisors and the low success rate of existing training programs explains why firms would attempt something new.
“There’s an increasing need to develop that next generation of advisors who can succeed to replace what our data shows to be an increasingly aging advisor force,” Michael Rose, an associate director for the wealth management practice at Cerulli Associates, said.
“Historically, non-white male demographics have been abysmal in the wealth management industry,” Rose said. Promoting wealth management among those demographics that haven’t historically gone into the industry “is another way of getting new potential advisors that you can bring into your training program,” he added.
Suzanne Bish, a lawyer with Chicago-based Stowell & Friedman, which has represented advisors who have settled a number of class-action race bias cases against wirehouses, including Merrill, and who was not on the panel, said that earlier attempts to solve the trainee success rates have been “very difficult.”
“Nobody gets a prize for participation and how hard you have tried,” Bish said. “The proof is only in the pudding.”
She has found that diverse rookie advisors who work with veteran teams will succeed at much better rates than others.
Tallies about diversity do matter, Jennifer Povlitz, a UBS Wealth Management division director who led the Thursday SIFMA panel, told the audience.
In 2002 for her division, 63% of the employees promoted or hired into “larger leadership roles” were diverse and 75% of the internal promotions were awarded to diverse employees, she said.
This year, one third of revenue from new advisors was generated by diverse advisors in her division, Povlitz said.
“Numbers don’t lie, and those are choices that we make,” said Povlitz, who leads UBS’s West division and oversees 3,000 employees and $2.5 billion in revenue.
Bank of America’s CEO Brian Moynihan requires direct reports, including Sieg, to review monthly the progress on diversity goals, including promotions and attrition, Hans said.
“That is a culture, a strategy and tactic that starts from the top and, of course, trickles down to all levels of leadership,” she said.