Merrill’s Sieg Nods to ‘Competitive’ Attrition Issue in Call with Brokers
Merrill Lynch Wealth Management President Andy Sieg on Wednesday acknowledged an issue with broker attrition and sought to reassure the Thundering Herd that the wirehouse is focused on retention and making Merrill the firm “of choice.”
The executive’s remarks, which came during a quarterly pre-recorded call to brokers highlighting the firm’s performance, appear to be Sieg’s first broad recognition of what recruiters have said is a consequential and accelerated rate of departures among high-end teams in recent years.
“For all these positives, there will always be areas needing focus from leadership. Right now, it’s competitive attrition–higher in this quarter than we’d like to see,” said Sieg, who has led the Merrill Lynch wealth unit since 2017. (A portion of the five-minute call was provided to AdvisorHub by a source inside the company.)
The remarks came as attrition of experienced brokers rose to around 5% in the second quarter from an average of around 4% that executives had cited in prior quarters, a Merrill spokesman confirmed.
The Merrill spokesman attributed the increase to “seasonal trends” and said it corresponded to a similar uptick in attrition in 2019.
Merrill’s Bank of America parent also reported Wednesday that headcount across its Global Wealth and Investment Management Division, which is comprised primarily of Merrill brokers but also includes several thousand private bankers and a cadre of salaried Merrill Edge advisors, fell 2.1% from the prior quarter and 5.9% year over year to 19,385. (Merrill has not broken out the number of traditional brokers since 2019.)
The decline reflected the subtraction of “a small number” of advisor trainees–about 8%–who did not accept positions in Merrill’s revamped training program, first unveiled in May with details solidified July 1, according to the Merrill spokesman, who said the firm expects hiring into the training program to accelerate in the latter half of this year following a Covid-19-triggered slowdown.
But Sieg’s commentary may reflect increased levels of concern following some high-end departures, according to an industry recruiter, Louis Diamond, as well as a broker at the firm.
“We continue to see many of the most significant and long tenured teams consider alternative options at a rate unmatched in recent memory,” Diamond, who has moved teams out of Merrill, wrote in an email. “Studying the change in advisor headcount is often a misleading figure because what really matters is the signal that’s sent when the most respected and seemingly happy advisors decide to leave.”
Another former Merrill manager also said that the attrition issue may have come to the forefront as brokers return to the office after the Covid-19 shutdown and see empty desks around them in some offices.
Recent exits include several two-decade-plus veterans of the firm and others who had spent their entire careers with the Thundering Herd. A 27-year lifer who had been producing $4.5 million in annual revenue in Washington D.C. joined Morgan Stanley, and three teams producing $12 million altogether who left for Rockefeller Capital Management on the same day.
In his remarks, Sieg did not include specifics of how the firm planned to address the issue but reaffirmed his commitment to the Herd.
“Fundamentally, the most effective way to address it is by focusing on all of you, ensuring Merrill remains the place of choice for serving clients. And make no mistake, we are unwavering,” Sieg said on the call. “This is and will remain the best such place–best platform, best advisors, best field leaders, best teams, entrepreneurial at its heart, under the banner of a brand with no equal in wealth management.”
Merrill, which halted veteran broker recruiting in 2017, has been taking both offensive and defensive measures to protect its market share. In April, the firm said it would look to selectively recruit veteran brokers in ‘key’ markets including Silicon Valley, San Francisco, and Florida. The firm also is piloting so-called “client experience” teams in effort to retain client assets when brokers leave.
Sieg on Wednesday also spotlighted an advertising push with Major League Baseball as a brand-image booster.
“If you’ve tuned in recently to any Major League Baseball, you’ve seen a lot more of that brand, and we intend to keep it coming,” he said.
One Merrill broker speaking on condition of anonymity said he felt Sieg’s remarks did not address some of the reasons brokers were leaving. The broker, who has spent his career with the firm, pointed to Merrill’s decision in 2018 to withhold payout on the first 3% of brokers’ revenue and to the “growth grid,” a sticks-and-carrots system for promoting asset and account growth that was implemented in 2018.
“The problem isn’t advertising. It’s the comp cuts,” the New York-based Merrill broker said. “The 0% on the 3% of fee-based business and the punitive end of the growth program.”