Merrill Lynch Wealth Management reported a strong second quarter for new client acquisitions, partially due to the collapse of several banks earlier this year, according to Merrill Lynch Wealth Management Co-President Lindsay Hans.
“We knew that everything that happened in March was creating elevated levels of money in motion,” Hans said during a call about the firm’s second quarter earnings. “We were very pleased in the second quarter; it didn’t slow down.”
In total, Merrill’s wealth business added 26,000 new client relationships in the first half of the year, a 106% increase over the first half of 2022. Eric Schimpf, who co-runs Merrill Wealth with Hans, said the second quarter marked the firm’s 26th consecutive quarter for household growth; year-to-date, he said advisors had added more households than all of 2022. The firm added more than 11,000 net new households during the quarter, a 150% increase from the prior year (and a second quarter record).
Hans noted Merrill had record new client acquisitions in the first quarter, and while the team expected to continue to see new money coming in, they weren’t sure how much the tumult in the banking sector during the first quarter would continue to reverberate.
In March, the collapse of Silicon Valley Bank set off a number of bank failures, with SVB being acquired by First Citizens Bank. Signature Bank followed SVB into ruin, and it was picked up by New York Community Bancorp. UBS agreed to buy Credit Suisse for $3.3 billion, potentially warding off further ramifications, and JPMorgan Chase acquired First Republic.
This is the firm’s first earnings report with Hans and Schimpf at the helm of the wealth management division. In late March, Andy Sieg, who had led Merrill Wealth for six years, departed the wirehouse to run Citigroup’s wealth management division. Hans and Schimpf took over the firm’s 25,000 employees and $2.8 trillion in assets, with Hans selected to succeed Don Plaus as head of Merrill Private Wealth only one month before Sieg’s departure. (Schimpf was previously a division executive for the West Coast.)
According to Schimpf, he and Hans had visited more than 20 markets since the executive shuffle, including Los Angeles, Miami, Chicago, Detroit and Palo Alto, Calif., to “further inform (their) thoughts around strategy.”
Merrill Lynch Wealth Management and Private Bank collectively hit about $5.2 billion in revenue during the quarter, a 5% dip year-over-year, which the firm attributed to lower equity and fixed income market valuations. Merrill reached about $1.5 trillion in AUM balances, an increase of about $64 billion from the first quarter.
In total, Merrill advisor headcount was 19,099 advisors at the end of the quarter, up 4% year-over-year. Schimpf said the firm added about 190 advisors since last quarter. Merrill Wealth also onboarded about 64% of its eligible accounts digitally last quarter, doubling the number of digital onboarded accounts since last year.
Hans said their strategy for the company was based on key industry trends, including that the pace of wealth creation would not slow, technology would continue to play a larger role, and that “big teams are going to get bigger.”
“Lastly, as we think about financial services as an industry, and all the different doors that talent can walk through, we see wealth management being the primary door,” she said. “We see it as the destination of choice for talent.”
Morgan Stanley Wealth Management also posted its second quarter earnings Tuesday, with record net revenues of $6.7 billion, a 16% increase over a year ago and 2% jump sequentially. The firm had about $90 billion in net new assets, totaling $200 billion in assets throughout the first half of the year.
However, Wells Fargo’s second quarter earnings showed a year-over-year dip from $603 million to $487 million in net income, while revenue decreased 2% from the year-ago period. Net interest income was up 10% due to higher interest rates, but non-interest income was down 5% due to “lower asset-based fees driven by a decrease in market valuations,” with expenses up 2% due to higher operating costs.