Pretax earnings at Merrill Lynch’s global private client group (GPC) rose 27 percent in the first quarter ending March 31 to $646 million, up from $510 million in the same period a year ago. As might be expected, the division’s headcount increased along with profits. Merrill added 1,170 advisors from the first quarter of 2005, bringing its industry-leading total to 15,350.
Merrill’s retail brokerage unit has been competing in an arms race with Smith Barney, Wachovia, UBS and Morgan Stanley to recruit the industry’s top brokers as they all vie for more fee-based business and wealthier clients. A new wrinkle to Merrill’s focus on organic growth through training and recruiting has been its newfound commitment to growing its sales force through the acquisition of smaller regional brokerage firms.
In December, Merrill completed its previously announced $400 million takeover of Hartford, Conn.-based Advest, which has helped boost the number of financial advisors in its stable. However, an escalating rate of attrition in recent months, due, in part, to a culture gap between the two firms, has called into question the merits of the deal.
But so far this year, GPC has seen no ill effects of those departures as favorable market conditions have been at its back. According to CreditSights Analyst David Hendler, Merrill’s retail brokerage arm is “humming with [a] strong macro backdrop as retail investors continue to boost transaction activity.”
Total assets in GPC accounts rose to more than $1.5 trillion. Total new net money was $16.9 billion during the quarter. When compared to Smith Barney, which gathered a mere $3 billion in the first quarter, Merrill’s results look particularly impressive.
“GPC was as strong as we expected,” said Credit Suisse First Boston analyst Susan Roth Katzke in a research note. “Expenses were well controlled.”
Revenues for the division were increased to $2.9 billion, up 13 percent from a year ago. As good as business was for the brokerage unit, it was better for the parent. Overall, Merrill Lynch revenues rose to $8 billion in the first quarter, a 28 percent rise from a year ago. Pretax earnings increased to $2.4 billion, a gain of 41 percent.