Illustration by Michael Witte

Illustration by Michael Witte

Head of the Herd

John Thiel, head of Merrill Lynch’s ‘thundering herd’ of advisors, on Wall Street’s reputation, advisor productivity, and why the wirehouse model of wealth management is here to stay.

WealthManagement.com: It’s been five years since the financial crisis. Where do you think the financial services industry stands today?

John Thiel: I think we’re more appropriately focused on client outcomes instead of just benchmarks. We have more work to do, but I think it’s been a healthy reminder for everybody—for us, the industry, for clients—that chasing returns without recognizing and managing the risks associated with getting those returns has consequences. Turns out the greatest risk is the risk of shortfall. It’s not the risk of volatility, it’s the risk of not having enough money to do what you want to do with it.


WealthMangement.com: The crisis damaged clients’ faith and trust in financial services. Do you think that has eased in recent years?

JT: I’m not sure how much faith clients lost in their advisors. They lost maybe some, but it rebounded very quickly. They lost faith in the industry, the companies in the industry. So I would say, in the industry, we’re recovering slowly. We have work to do: We need to make sure we continue to act on behalf of the best interests of our clients and demonstrate that every day.


WealthManagement.com: Focusing on the wirehouses, where do you see them heading? Is there more consolidation ahead, or will we see the four wirehouse firms as they are five years from now?

JT: Well, my sense is yes. I think each one of those four have enough scale in their business to maintain themselves. This doesn’t prevent someone from coming in, someone really big, and trying to buy in. But that’s going to be harder to do. Five years from now, we’ll still see four wirehouses.


WealthMangement.com: Do you think we will see any smaller firms rising to the wirehouse level?

JT: You have wonderful companies out there that do a very good job for their clients, and other firms are certainly getting bigger and less regional. I think there are other providers that do a good job for their clients. Will they reach that level? I’m not sure. I’d argue that a firm with thousands of advisors is probably right in there.


WealthMangement.com: Perhaps a dated term, “wirehouse” is still a prevalent descriptor of the full-service model. Where do you draw the line?

JT: I think it’s just the way we’ve always thought about things. We’re a bank; everybody’s a bank. So while owned by a bank, we’re still a broker/dealer. There are a lot of broker/dealers out there, so it’s a very good question.


WealthMangement.com: Reports show the flow of advisors going independent continues. What’s the long-term impact of this trend?

JT: I don’t see it happening from our perspective to the extent that people talk about it. We have lost less than 50 advisors to the independent channel this year, that’s out of 14,000 [advisors]. So it’s hard to suggest that it’s a trend or that it’s something new.


WealthMangement.com: A prevailing perception within the industry is that the wirehouses are a staid environment, with less innovation than their independent counterparts. What would you say to people to challenge that perception?

JT: We’re in business to serve our clients and the innovation is in and around how the clients want to be served and what they’re trying to accomplish. We’re innovating in the tools and resources for our clients. That can be making sure video conferencing is available, having our clients be able to have a face-to-face meeting without having to get in their car and drive downtown. It can be planning tools that allow us to really understand what their funded status is of a future goal or liability. People might say that’s simple, but simple is sometimes the hardest thing to innovate.


WealthManagement.com: Looking specifically at Merrill Lynch, the firm seems to be leading the pack in terms of production-per-advisor. The firm’s advisors seem to be doing more with less. How is the firm accomplishing this, and is it sustainable?

JT: The reason we have the productivity advantage that we have is really due to the skill set of our advisors, in my opinion, as well as the platform and the set of solutions we have for clients. There are wonderful solutions around investment management, but we also have fantastic solutions for cash management, lending and liability management, as well as wealth structuring and successfully passing on wealth through estate planning. And when you do all of those things for your clients, you get a greater share of the wallet and you’re going to be more productive than one who simply focuses on the investment process.


WealthManagement.com: It’s been reported that early in the fourth quarter, Merrill Lynch may cease to be a legal entity. Could you explain this a bit? Why now?

JT: Let’s be clear: Merrill Lynch, Pierce, Fenner & Smith is a broker/dealer. That broker/dealer will continue to operate and our business, Merrill Lynch Wealth Management, will operate underneath Merrill Lynch, Pierce, Fenner & Smith. We have to have a broker/dealer to operate. We don’t need a separate holding company when we have Bank of America North America as a holding company. Merrill Lynch, Pierce, Fenner & Smith will continue to exist; it is the entity under which we operate.

WealthMangement.com: Going forward, what projects are on the horizon for Merrill Lynch?

JT: We continue to work on our tools to make sure our advisors can shift the conversation to that goals-based, client-desired outcome approach. So how do we make it efficient and effective? How do we make it easy-to-understand for clients, instead of saying ‘I beat the S&P 500 by 10 basis points’? That guarantees nothing. We are really spending a lot of time making sure we can provide our advisors with an end-to-end experience where they can demonstrate to the client where they stand and really focus on the conversation of fulfilling their goals and outcomes, versus spending all of our time comparing ourselves to a benchmark, which may or may not guarantee a safe and comfortable retirement.


Check out the rest of our State of the Wirehouse Q&As:

“I Don’t Work for a Wirehouse”

Bob Mulholland, Head of UBS’ Wealth Management Division
Bob Mulholland, Head of UBS’ Wealth Management Division [4]





Bigger is Better [5]

Doug Ketterer, Managing Director of Wealth Management, Morgan Stanley
Doug Ketterer, Managing Director of Wealth Management, Morgan Stanley [5]