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Merrill Lynch on Track for Record Year in Client Acquisitions

Merrill added about 33,500 net new client relationships year-to-date, according to the firm's third quarter earnings. Wells Fargo also announced earnings this week, with mixed results for its wealth management business.

Merrill Lynch Wealth Management is on track for a record year in net new client relationships, according to the firm.

In describing the firm’s third quarter growth, Merrill Wealth co-President Eric Schimpf said the firm saw a continuation of the second quarter’s money moves spurred by the turmoil in the banking sector earlier this year, “albeit slower.”

Merrill has added about 33,500 net new client relationships in 2023 so far, according to Bank of America’s third quarter earnings results. Merrill’s revenue was up about 1% to approximately $5.3 billion for the quarter, spurred by asset management fees slightly offset by dips in net interest income.

Both Schimpf and co-President Lindsay Hans said company-wide headcount reductions were unlikely to impact Merrill’s wealth management division. Headcount in the firm is expected to be flat at third quarter levels, moving forward, according to Reuters. (The company’s total headcount is 212,752, down from 215,546 at the end of the second quarter.) 

“We’re going to continue to grow our client-facing businesses to support revenue growth, and we’re always going to manage the business as efficiently as we can,” Hans said during a call detailing third quarter wealth results.

Net new relationships in Merrill Wealth and the private bank division jumped 7,000 from the second quarter, a year-over-year increase of 20%. The firm saw a 60% year-over-year increase in ultra-high-net-worth households. 

While loans were flat between quarters and slightly down from the prior year, UHNW clients’ custom lending tended to hold up stronger compared to loans among clients of other wealth levels, according to Hans. She speculated that loans were a “core solution” for UHNW clients, so they were not as impacted by the weight of higher interest rates.

“It could be insulated a bit more because of that,” she said. “And (because of) their ability to make adjustments in different ways to create liquidity, they could have a bit more options in front of them given their wealth.”

As of the end of the third quarter, Merrill had 19,130 advisors, up 31 sequentially and 289 over the year-ago period. According to Merrill, seven out of 10 eligible accounts were onboarded digitally last quarter. 

This is the second quarter with Hans and Schimpf leading the division after the two took over for Andy Sieg, who left to run Citigroup’s wealth unit in late March. Hans was promoted to succeed Don Plaus as the head of Merrill Private Wealth only a month before Sieg left.

During the second quarter earnings presentation, Schimpf said there’d been “elevated levels of money in motion” toward Merrill due to the banking crisis in March. Silicon Valley Bank (and its acquisition by First Citizens) was the first domino, followed by Signature Bank. UBS acquired Credit Suisse, and JPMorgan Chase picked up First Republic. The tumult led to Merrill’s 106% increase in net new client relationships over 2022’s first half. 

Despite this “money in motion,” Schimpf acknowledged that new client relationships spurred by the tumult slowed over previous months. At the same time, the third quarter is historically slower in terms of client acquisitions, he said.

Wells Fargo also announced its third quarter earnings this week, with mixed results for its wealth management business. The net income for the bank’s wealth division was $529 million, down 17% year-over-year but up 9% sequentially. The firm reported a 7% dip in net interest income over the same time period attributed to “lower deposit balances as customers reallocated cash into higher yielding alternatives, as well as lower loan balances, partially offset by the impact of higher interest rates.” 

The wealth and investment management division’s revenue was $3.7 billion, up 1% both from the previous year and quarter. Total client assets were up $11 billion from the year-ago period, and noninterest income was up 5% from the prior year, according to the firm.

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