Neither Morgan Stanley Smith Barney nor Bank of America ended 2009 with a bang in the earnings department. But their wealth management units were pockets of strength.
Merrill Lynch offered some relief in a disappointing fourth quarter for Bank of America, with year-end net income of $1.5 billion, a 22 percent increase versus the previous year. Net income for the whole wealth management division, which includes U.S. Trust and Columbia Asset Management, totaled $2.5 billon.
Client assets continue to grow at Merrill, which closed the year with $1.3 trillion, up from $1.2 trillion in the third quarter and $172 billion at the end of 2008. More good news: Merrill advisors managed to raise average annual production from $800,000 in revenues at the start of 2008 to $817,000 at the end of 2009.
Average production levels at Merrill are the highest on Wall Street, but Aite Group research director Alois Pirker says Merrill tends to downplay the number of producing advisors it uses to calculate this number. The averages tend to be higher because the firm attributes revenues to ‘primary advisors’ and not supporting producers on the staff. Most firms, he says, include all producing advisors in their rep count. “At the end of the day, Merrill advisors are more productive than others. But $125,000 more productive? I don’t think so,” Pirker says.
Earlier this week, Sallie Krawcheck said that the "exodus" of financial advisors from the wirehouse firms that has been written about repeatedly in press had slowed. In fact, Merrill gained a net 27 advisors in the fourth quarter, bringing total advisors at the firm up to 15,006. That's compared to a loss of 814 advisors in the first quarter of the year, right after Bank of America and Merrill completed the merger. Bank of America does not report net new assets, but Pirker says it’s likely the firm isn’t seeing any significant net asset inflow.
Morgan Stanley Smith Barney
MSSB is still the largest retail brokerage firm in terms of headcount, with 18,135 advisors at the end of 2009, a net loss of 25 from the prior quarter. Pirker says the number of advisors at MSSB has also stabilized a bit.
Average production at Morgan Stanley Smith Barney stood at about $692,000, up from $662,000 at the end of the third quarter. Client assets rose 2 percent to $1.6 trillion compared with $1.5 billion in the third quarter and $550 million a year ago. Net revenue was up slightly to $3.1 billion from $3 billion in the third quarter and $1.3 billion last year. (Total net revenue at the firm was $7 billion.) The firm says the jump in wealth management revenue is related to the MSSB joint venture, which closed on May 31, 2009.
Still, MSSB saw net asset outflows of $5 billion in the fourth quarter. The firm has reported net client outflows in four of the last five quarters. Pirker speculates that the losses represent clients leaving the firm. “It seems they are losing much of their assets through clients below the $1 million mark. They are doing a lot better with clients above $1 million, which suggests [Morgan Stanley Smith Barney] is offering them incentives to stay,” Pirker says.
“Overall, I’m impressed with Morgan Stanley Smith Barney. The $5 billion outflow isn’t great but the number of advisors leaving has decreased and it looks promising,” says Pirker.
Morgan Stanley Smith Barney CEO James Gorman said today that the brokeratge recruiting wars of recent months are over for now. Indeed, many firms have lately been offering 300 percent plus recruiting packages for top advisors, as competition for advisors intensified and switching firms increased.
But Danny Sarch, founder of Leitner Sarch Consultants, a financial services executive recruiting firm, says recruiting has not stopped or slowed down in any form quarter over quarter. “Of course movement has slowed compared to the fourth of 2008 or January 2009, but no one is any less anxious about recruiting than they were late last year,” he says. He adds that recruiting deals at the major firms are still very competitive. Merrill Lynch and MSSB are still offering recruiting deals of 300 percent plus of trailing 12-month production.