For mutual fund sales powerhouse Merrill Lynch & Co., products must be simple. They have to be easy to explain to clients because the firm's financial advisers don't have the time to get into complexities.
For example, take Merrill Lynch & Co.'s wrap account business. It did $13 billion in sales in 2001, nearly double the $7 billion recorded in 1999. "This year the run rate is $30 billion in sales. The wrap fee guys figured it out," Chris Grady, director of sales and marketing for the Merrill Lynch Insurance Group told attendees at last week's National Association for Variable Annuities variable life conference in Dallas. "If the insurance industry can do the same, "you'll be so wealthy it'll be scary," he promised.
Mutual funds, stocks and bonds meet Grady's criterion for simplicity. Insurance does not and that prevents ML's advisers from selling more insurance, said Grady, who noted that Merrill's insurance division was merged with the trust department and made part of wealth management.
The average Merrill Lynch financial adviser manages $91 million in assets and does $700,000 in commissions annually, Grady said. "He can do how many mutual fund tickets in an hour? How many clients can he call in an hour?" Grady asked.
In 2000, Merrill Lynch sold $70 billion in mutual funds, more than $1 billion in annuities and $400 million in single premium variable life. While $400 million may sound like considerable sales, "that's a lousy week in mutual funds," Grady said.
The potential for insurance sales may be extraordinary, but the potential won't be realized if the product is not simplified, he said. As long as their time is limited, advisers will gravitate to commoditized products.
The process of selling insurance is clearly the issue at Merrill Lynch, Grady said. "We have a great product but we don't sell enough of it," he explained. Last year, 37 specialists took in $100 million in premiums. "The numbers are extraordinary but the potential is even more extraordinary," he said.
At one point, Grady downplayed the importance of insurance, asking if Merrill Lynch would be concerned if an adviser loses a policy sale to another company. "Does the firm care? Do the assets go over to MassMutual? No. We own the assets. That's the magic of Merrill Lynch," he said.