Bank of America’s Global Wealth & Investment Management unit, which includes Merrill Lynch, posted increased revenue and advisor productivity in the fourth quarter, signs investors may be shifting assets into longer-term, higher-margin products, the company said Friday morning.
Investment and brokerage revenue was up $155 million, or 6 percent, from the third quarter, which the company says is due to higher asset management fees and brokerage income. Asset management fees grew to a record $1.4 billion during the quarter, while brokerage income rose to $1.5 billion, said Charles Noski, chief financial officer, during a conference call.
Meanwhile, financial advisor productivity was up 8.7 percent from the third quarter and up 4.3 percent on a year-over-year basis.
Total client balances also improved in the fourth quarter, rising to about $2.24 trillion from $2.17 trillion in the prior quarter. The growth was “a result of market activity and strong flows into deposits and long-term asset management products.”
And he’s right. Client deposits grew $22 billion sequentially and about $41 billion from 2009. This could be an indicator of increased cross-selling between the investment and banking sides, said Sophie Schmitt, senior analyst at Aite Group. The bank is either profiting from temporary market conditions or successfully aligning the lines of business around the client, she said.
Bank spokesman Jerome F. Dubrowski attributes the increase in client balances to the bank’s increased success at selling banking products to legacy Merrill Lynch clients, said. Bank of America has made significant inroads into that side of the business in the last few quarters, he said.
Dubrowski also points to the fact that investors are taking assets out of short-term products and putting more into long-term products. While overall assets flows were down about $2 billion, the wealth management unit reported increased flows into long-term assets of $6.9 billion. “That’s a healthy sign,” Schmidt said. These long-term assets generate higher fees, she added.
For the year, asset flows were down $24.6 billion, compared to being down about $93 billion in 2009. In addition, year-over-year flows to long-term assets rose about $15 billion.
Assets under management within GWIM reached $644 billion for the fourth quarter, up from $624 billion in the third quarter, part of which was due to market appreciation, Dubrowski said. He blames the mid-year sale of Columbia Management for the year-over-year decline in assets. Compared to 2009, assets are down $106 billion, and Columbia accounted for $114 billion in assets, the company said.
Still, there are some assets going out the door, with liquidity asset flows down $44.6 billion from 2010 compared to 2009. Where is that money going? Schmitt believes some wealthy clients are seeking to manage some money on their own, turning to independents and self-directed brokerages. Some of that cash could be going to TD Ameritrade, which had an 11.5 percent growth in new assets last year, and Schwab, with 15 percent growth in new assets year-over-year.
Despite the lower asset flows, it seems like Bank of America is doing better at minimizing or reducing outflows compared to 2009, Schmitt added.
Advisor headcount was up by about 300, but executives said they were disappointed by the figure and plan to add more to the ranks this year. The wealth management division now has 15,498 reps, compared to 15,171 at the end of 2009.
Overall, the bank posted a loss of $1.2 billion sequentially and $2.2 billion for 2010, which executives said was largely driven by goodwill impairment charges, representatives and warranties provision and litigation expenses.