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Wealth management

Merrill adds client, high net worth relationships without swelling advisor ranks

By Dan Shaw
January 12, 2024 5:02 PM
wolterke - stock.adobe.com

Merrill Lynch again boasted Friday of a steep increase in its tally for client relationships even as its advisor headcount increased slightly.

Executives at the Bank of America wealth management subsidiary said on an earnings call Friday that their firm added nearly 40,000 new client relationships in 2023. The 47% year-over-year number surpassed a record last set at the firm in 2019. The firm also reported its headcount for Merrill advisors was up by about 175 and its count for coveted ultrahigh net worth clients was up 45% for the year. 

Eric Schimpf, the co-head of Merrill Wealth Management, said that increase comes as the firm continues to bring "somewhat north" of 2,000 industry newcomers through its internal training program. Schimpf said he and his fellow wealth co-head, Lindsay Hans, are also reviving Merrill's efforts to recruit experienced advisory teams from elsewhere.

"Lindsay and I and the team continue to look at the best investment advisors in all of the communities that we serve," Schimpf said. "And we believe we offer a strong compelling offer for them to bring their business to stay alongside of our current advisors and continue to transition and retire."

Hans noted that the firm last year made changes to an unpopular pay grid policy. The new replacement system offers rewards to advisors who attract three client households with more than $500,000 each and who increase their existing clients' assets and liabilities by 7.5%.

READ MORE: JPMorgan sets records with client asset inflow, profits in 2023

"When we designed that plan, and rolled that out, it was very much in response to feedback from our advisors," Hans said in the earnings call. "And a lot of those changes reflect that and … some things were simplified and structured in a way to reward advisors who are strategically and sustainably growing their business."

For highlights from Merrill Lynch's fourth quarter and annual earnings report, scroll down. To read about the firm's third quarter results, click here. For the second quarter, look here.

Financials

Bank of America's Global Wealth & Investment Management segment, which includes Merrill, reported just over $1 billion in net income in the fourth quarter, a figure down from $1.2 billion year over year. The segment's profits were also down for the entire year. It reported $3.95 billion for 2023, down from nearly $4.7 billion in the previous year.

The segment's net revenue was also down. It reported a 3% decrease for the quarter, bringing the figure down to $5.2 billion. 

The decline was driven largely by falling net interest income — the difference between what a lending institution pays on deposits and charges on loans. That was offset by "higher asset management fees due to higher market levels and AUM flows," according to Bank of America.

For the entire year, the segment reported $21.1 billion in net revenue, down from $21.7 billion. Merrill itself saw its revenue figure slide to $17.5 billion from $18.1 billion. Bank of America's private bank meanwhile saw its revenues more or less hold steady at around $3.6 billion in 2023.

Financial advisors

Merrill itself may have added 175 advisors in the year, but Bank of America's entire Global Wealth & Investment Management segment lost about 350 in total. It ended 2023 with a headcount of about 18,916. That tally, which includes advisors at the private bank, was down about 2% year over year.

Schimpf said the decline is due in part to more and more customers choosing to use digital services rather than work through advisors.

"That part of our business is just more effective," he said.

Schimpf said Merrill's loss of financial advisors hovered around its historic average. He said there were some encouraging signs for advisor retention toward the end of 2023 but did not elaborate.

Assets

The Global Wealth & Investment Management segment ended the year with about $1.6 trillion in client assets under management, a figure up 15% year over year. When brokerage assets, deposits and loans and leases were added to that, the total came to $3.8 trillion in total client balances, up about 12% year over year. Of that total, Merrill claimed about $3.2 trillion and the private bank the remaining $600 billion.

The results were driven, according to Bank of America, "by higher market valuations and positive net client flows." The Global Wealth & Investment Management segment reported asset inflows of $8 billion in the fourth quarter and $52 billion for the entire year.

Expenses

The Global Wealth & Investment Management segment reported a 3% year-over-year increase in its non-interest expenses in the fourth quarter, which rose to $3.9 billion. The increase, according to Bank of America, was partly driven by "revenue-related incentives."

Remark

Hans emphasized the advantages Merrill clients gain from being associated with an institution like Bank of America. She said 130,000 new bank accounts were opened by Merrill clients in 2023.

"And specifically, when you look at clients that have a banking relationship with us, on average, they have 35% more assets with the firm than clients without a banking relationship," Hans said. "And they're also more likely to have a longer-term relationship underscoring the value to both clients and advisors."
Dan Shaw
Reporter, Financial Planning
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