During a call with analysts Monday morning, Bank of America CEO Brian Moynihan said its wealth management unit was the “best business in the world,” citing new client acquisition as the primary reason for the unit’s growth.
Year-to-date, gross household acquisition by experienced Merrill Lynch advisors was up 87 percent compared to same period in 2017, the strongest acquisition rate over the same period in at least the last 5 years, according to the brokerage.
The growth is driven in part by the 2018 compensation plan revealed in November of last year, which offered an increased monthly payout to advisors by an additional 2 percent if they added clients and grew their net new assets and liabilities to a minimum of 5 percent, compared to the prior year-end total.
The company didn’t share new households per advisor for the third quarter. But in the second quarter, Merrill Lynch added about 4.6 new households per advisor, up from about 2.4 in the second quarter of 2017.
BofA’s wealth management unit, which includes Merrill Lynch and U.S. Trust, reported record client balances of over $2.8 trillion in the third quarter, driven by market appreciation and money flowing into the businesses. Assets under management also hit a record of more than $1.1 billion, up 10 percent year-over-year.
Increased focus on further intermingling wealth management with the bank’s other business units has also spurred growth.
Andy Sieg, head of Merrill Lynch Wealth Management, told attendees during a presentation last month at the Barclays Global Financial Services Conference that leveraging referrals to and from wealth management would be key to its growth going forward, as well as gathering fee-based advisory assets.
Last year, BofA’s four other segments sent more than 44,000 business referrals to the wealth management segment and wealth management sent more than 77,000 to them. About half of all referrals coming and going from the global wealth and investment management unit were with the consumer banking segment.
GWIM increased revenue by $163 million, or 4 percent YOY, in the third quarter to more than $4.8 billion. The wealth management unit accounted for well over a fifth of BofA’s total revenue of $22.8 billion in the third quarter.
The unit is highly profitable and, despite some industry headwinds, is getting more efficient. The GWIM segment had a pre-tax margin of 27 percent in 2017, but improved it to 28 percent this year and maintained that in the third quarter.
In 2017, wealth management accounted for $3.1 billion, or 15 percent, of BofA’s income and it’s on pace to surpass that in 2018. The GWIM unit has reported income of more than $1 billion in each of the first three quarters.
BofA reported net income of $7.2 billion, up 32 percent, and earnings-per-share of 66 cents, up 43 percent, in the third quarter of 2018.