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Merrill Lynch: Revenues Down, Advisors Up

Persistently low interest rates and deflated markets led Merrill Lynch Wealth Management to a quarterly decline in revenue, even as the national brokerage firm added advisors.

Merrill Lynch Wealth Management reported $3.7 billion in revenues during the third quarter, down 5 percent from a year ago and down 2.6 percent from the previous quarter. The firm said the drop was due to market volatility, particularly at the end of August, which both decreased client account balances and lowered the asset management fees it collects from clients. 

Brian Moynihan, chairman and chief executive of parent company Bank of America, said that while the wealth management business is showing the effects of the markets, he remains positive on the unit’s long term flows of $4.4 billion this quarter and supports Merrill’s vision of “more advisors, better products and better advice.”

Within the Merrill Lynch Wealth Management division, advisor headcount was up by 193 advisors for the quarter to a total of 14,563. The brokerage recruited 175 advisors from outside the firm since January and is up a total of 478 advisors, trainees and recruits, since the end of 2014, according to firm spokesman Matthew Lynch.  Lynch also noted that when advisors leave Merrill Lynch, the firm retains, on average, 40 to 50 percent of the client assets—twice the industry average of 20 percent.

The brokerage unit’s parent, Bank of America, beat analysts’ expectations for the third quarter. Profits rose to $4.5 billion, or $0.37 per share. Revenues for the Charlotte, N.C.-based back declined from a year ago, falling 2.4 percent, to $20.9 billion.

Here are the highlights:

  • Net income in Bank of America’s global wealth and investment management unit, which houses both Merrill and private bank U.S. Trust, fell 19 percent from a year ago to $656 million for the third quarter. Merrill Lynch’s profits for the quarter were not broken out.
  • Merrill’s overall client balances were at $1.9 trillion at the end of the third quarter, down $109 billion from the prior quarter.
  • Merrill’s asset management fees were up 3.2 percent year-over-year to $1.7 billion during the third quarter.  Fee-based flows rose above $4 billion, and positive client balance flows totaled nearly $17.2 billion.
  • Long-term AUM flows of $4.4 billion, which were positive for the 26th consecutive quarter. The growth generated an additional $392 million of fee-based revenue, up 8 percent from the prior year.
  • Advisor productivity is at $1.31 million per “experienced” advisor (meaning those not still in the training program), down slightly from the previous quarter’s $1.36 million. Overall productivity was $1 million for all advisors, including trainees, also down slightly from the $1.04 million reported last quarter.

 

 

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