Financial advisors at Merrill Lynch are on track to bring in, on average, six new clients each this year, even as positive flows to the unit’s fee-based asset management platform have waned over the past year.
The firm brought in 17,000 “new relationships” in the second quarter, on track to 70,000 new households by year-end, said a senior Merrill Lynch executive. The average size of each of these new households was $1.4 million, said the executive. That pace of growth is up 10 to 11 times the rate just a few years ago, the executive noted.
Overall, the Global Wealth and Investment Management unit of Bank of America posted a record $1.1 billion in net income over the second quarter, up 11% from the prior year, on revenue of $4.9 billion.
That’s even as AUM flows—assets in the wealth unit’s fee-based accounts—dropped from a positive $10.4 billion in the same quarter last year to a positive $5.3 billion during the quarter this year. The senior executive said part of the slowing growth into the more profitable fee-based accounts was attributable to the fact that the Department of Labor pulled back on their effort to impose a fiduciary rule for advisors to retirement accounts.
“I think subsequent to DOL the flow of activity has been a little more balanced between investment advisory and brokerage,” the executive said. He said a common household client trajectory is to start with the firm on a brokerage basis, before assets gravitate into advisory.
Merrill Lynch’s focus on growth over the past two years was accelerated by a broader referral network from the retail bank—10% of new clients to Merrill Lynch came from “another part of the company,” the executive said—as well as changes made to advisors' compensation grids a few years ago. Those compensation grids are unlikely to change in the coming year, he said.
Total advisors at all three wealth management channels, including Merrill Lynch Wealth Management, the Private Bank and Merrill Edge, grew to 19,512, up 1% from last year.
Looking singularly at the “Thundering Herd,” Merrill Lynch’s traditional retail financial advisor force, total advisor numbers dropped less than 1% to 14,690. The firm said the falloff was the result of focusing only on “bringing the highest quality candidates into our training program.”
Private client advisors at Bank of America Private Bank increased 17% from the prior year, to 485, which the firm attributed to a planned expansion into new markets.