Merrill Watching Consolidation with Eyes Wide Open

James Gorman, head of Merrill Lynch's private client group, believes the brokerage industry will continue to consolidate in the coming years. He remains coy about what type of firm interests Merrill, but he was firm on one matter: the fact that his firm was prepared to jump on the right opportunity. Merrill will play in the consolidation, he says. We're capable of that and well positioned to play

James Gorman, head of Merrill Lynch's private client group, believes the brokerage industry will continue to consolidate in the coming years.

He remains coy about what type of firm interests Merrill, but he was firm on one matter: the fact that his firm was prepared to jump on the right opportunity. Merrill “will play” in the consolidation, he says. “We're capable of that and well positioned to play in that trend.”

During a press conference at the SIA's annual conference, Gorman said the growing costs of training and compliance continue to squeeze smaller broker/dealers, and as a result, “the only way to offset that is through scale.”

There is a persistent rumor that a bank will acquire Merrill, but so far that has not come to pass.

Currently, Merrill Lynch has 14,200 advisors, and the current plan — to grow the advisory force by 5 percent annually for the next three years — remains.

Turnover among the top two quintiles of reps (the top 40 percent of advisors), is at 4.5 percent, Gorman said, compared with an industry average somewhere around 15 percent. He wouldn't release overall turnover figures for the firm, other than to say they were at “historic lows” and have been declining for the past several years. This has put the firm in the position of having to recruit less from the shallow talent pool of available reps.

The firm is continuing to add to its workforce through training and external recruiting. The latter effort has been particularly important with respect to adding high-net-worth advisors to handle accounts of $10 million or greater in the firm's private banking offices.

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