Merrill sees surge in client relationships during earnings call

Hans, Schmipf boast of new client relationships in first Merrill earnings call

July 18, 2023 4:26 PM

Merrill Wealth Management's new top executives capped off roughly their first 100 days in office with a quarterly decline in revenue but a surge in client relationships.

In their first earnings since being named Merrill co-heads and presidents in late March, Lindsay Hans and Eric Schimpf boasted on Tuesday that the firm had added 26,600 client relationships in the first half of 2023, a 106% year-over-year increase. Still, Merrill — which has been part of Bank of America since 2008 — and its affiliated private bank ended the second quarter with $5.2 billion in revenue, a 4% drop from the same period last year. Merrill said low equity and fixed-income market valuations were to blame.

Net income for the unit including both Merrill Wealth Management and the private bank also declined, going down by nearly 18% year over year to $978 million in the second quarter. At the same time, Merrill saw growth in both its assets under management and advisor headcounts.

"Despite challenging market conditions, Bank of America's wealth management businesses delivered strong results," Schimpf said in the earnings call. "This is thanks in large part to the efforts of our advisors and the teams they use to meet client needs while continuing to attract new clients."

Much interest has attached to Hans and Schimpf's plans for Merrill following the departure of the unit's former president, Andy Sieg, for Citigroup in late March. Schimpf said his and Hans' priorities have included filling leadership roles and meeting with firm representatives throughout the country.

"We're seeing it firsthand as we're out on the roads, meeting with our teammates, our advisors, our client associates, market executives and our specialists in over 20 markets from Los Angeles, Philadelphia, Palo Alto, Chicago, Atlanta, Miami, Detroit and many others," he said.

Hans said she and Schimpf have identified a handful of trends that will influence the firm's plans in future. Wealth will continue to grow at a fast pace in the U.S., Hans said, and technology will play an ever bigger role in wealth management as clients will come to look to advisors and advisory teams to provide answers to all sorts of financial questions ranging from investing to banking.

"We think big teams are going to get bigger," Hans said.

To see more highlights from Merrill's second-quarter earnings, scroll down. To read about the firm's first-quarter earnings, click here. For the fourth quarter, click here.

Financials

Merrill Wealth Management reported a nearly 5% decline in revenue year over year to $4.34 billion in the second quarter. By contrast, the Bank of America Private Bank, which mainly caters to affluent clients, reported a nearly 1% gain for nearly $902 million in revenue.

Merrill and the private bank's noninterest expenses increased by 1% to $3.9 billion "as investments in the business, including strategic hiring, were mostly offset by lower revenue-related incentives."

Advisor count

Bank of America reported having 19,099 advisors on staff at the end of the second quarter, a figure that takes account of employees in both its global wealth and investment management and consumer banking divisions. That figure was down slightly from 19,243 in the first quarter but up from 18,448 year over year.

Hans said the firm is putting a lot of time and resources into making sure new recruits are prepared for the job.

"Today, as we sit here, we have 2,500 trainees at various stages, and we're adding roughly 200 a quarter," she said. "And those trainees are contributing at a higher pace — thousands of new households … this quarter."

Client recruitment

Of the 26,600 net new client relationships Merrill and the private bank took on in the first half of 2023, roughly 12,000 came in the second quarter. Schimpf said on the earnings call that the firm added nearly 11,000 households in the second quarter, almost a 150% increase year over year.

"Our advisors have already added more households than in all of 2022," he said.

Schimpf said 64% of new accounts at Merrill Wealth Management were opened digitally, twice the pace of last year.

"Not only does this provide a better client experience, but it creates efficiencies for advisors and our teams that help them and will ultimately help them scale their practices," he said.

Client assets

Merrill and the private bank's total client balances — including assets, deposits and loans — were up by nearly 8% year over year, rising to $3.64 trillion. Of that total, nearly $3.1 trillion was attributed to Merrill Wealth Management and $577.5 billion to the private bank. Assets under management at both Merrill and the private bank rose by slightly more than 8% to $1.53 trillion in the second quarter.

Remark

Hans said she sees strong prospects for continuing to attract new recruits to Bank of America and Merrill's advisory business.

"As we think about financial services as an industry, and all of the different doors that talent can walk through, we see wealth management as being the primary door," she said. "We see it as the destination of choice for talent, just given the growth and these trends and the innovation in this business."