Andy Sieg, president of Merrill Wealth Management at Bank of America.
Pushing back on frequent headlines about its advisor attrition in recent quarters, Merrill flaunted strong growth in its ranks — especially from hiring more early-career talent — on an earnings call Monday with reporters.
The president of Merrill Wealth Management at Bank of America, Andy Sieg, also touted record earnings numbers for the unit. Sieg doubled down on earlier public comments predicting a bull market for financial advice, fed by investor uncertainty in the face of volatile markets, and said Merrill's roster of both advisors and clients had continued to grow.
The wealth unit of Bank of America, together with Bank of America Private Bank, reported a net gain of 392 advisors in the third quarter, or 2%, for a total of 18,841 advisors. That's up from 18,449 in Q2, though the number is still short of the 18,855 from the same quarter last year.
"This was driven in part by another strong quarter of recruiting experienced advisors to Merrill, including early-career advisors, through our accelerated growth program," Sieg said on the call. He added that the bank had chosen to focus in recent quarters on recruiting "advisors who are early in their career in the industry," with 97 such hires this quarter and 93 in the second quarter through the AGP. Overall, he said, "in terms of numbers of recruits, and experienced hires, each of these quarters has been the most successful quarters in over a decade."
The bank's earnings presentation showed that combined, Merrill and Private Bank gained 5,700 net new relationships in the third quarter. At Merrill, "We added nearly 5,200 net new households, up 23% year to year," Sieg said. He added that year to date, the firm had acquired nearly 17,000 net new households.
To see the main takeaways from Merrill's third-quarter earnings, scroll down the slideshow. For coverage of the firm's second-quarter earnings, click here. For a look at the results from the first quarter, follow this link.
Profits despite losses
Together, the two divisions of the bank's Global Wealth and Investment Management business also reported nearly $3.5 billion of profits, up 12% year over year from $3.1 billion. Merrill Wealth Management and the Private Bank had a combined record Q3 revenue of $5.4 billion, up 2% year over year. They also had record net interest income of $2 billion, up 36% year over year.
However, the two units also reported a combined 12% loss of client balances, which fell to $3.2 trillion from $3.7 trillion a year ago — "driven by lower market valuations, partially offset by net client flows," the company said in a news release. Total AUM also declined to $1.3 trillion, from $1.6 trillion year over year, but the firm continued to add clients to its books.
Investing in tech products
Sieg said the firm has been rolling out or expanding several tools to help advisors do their jobs and satisfy clients seeking highly differentiated services. Merrill Advisor Match, an online questionnaire to help clients find suitable advisors, launched earlier this month. Personal Wealth Analysis, a financial planning digital tool, will receive upgrades next month including a better user interface to help advisors model scenarios for clients. Additionally, a suite of tax overlay strategies launched last year is "being used by 60,000 clients and already represent nearly $40 billion in AUM," Sieg said.
Bull marketing
Later this month, Merrill plans to launch a massive ad campaign to aid advisors in client acquisition, featuring the firm's famous charging bull mascot. "The ads will run nationally and locally in nearly 100 markets and across multiple channels: print, broadcast, online and social," Sieg said. "This will be the largest Merrill Wealth Management advertising campaign in recent history."
Client retention
Despite the headlines, which seem to come every week about Merrill losing veteran advisors to rival brokers or RIAs, Sieg said client retention had improved significantly thanks to efforts to smoothly transition them to a new advisor. "At this point, when advisors leave, four to six months out, half of their clients have been retained by our firm," representing more than a "10 percentage point increase from where we were two years ago."
Alternatives
Wealthy clients, spooked by the turmoil in markets, turned increasingly to alternative investments, Sieg said. "Our clients today have over $76 billion of alternative investments holdings with us. That number is up substantially year over year." He added that 2022 will be a "record year in terms of new client allocations to alternatives" and said the bank had hired more than 50 new staff on its alternative investments team, led by Nancy Fahmy, to meet the growth in demand.
Remark
"The entire industry, and our clients are facing a more challenging set of financial conditions," Sieg said. "There's been somewhat less creation of wealth through events like companies going public, the M&A market and the like."
He added that year to date across Merrill, private bank and consumer investments, net client flows were a robust $100 billion. "This is off the record pace of last year, but extremely strong results against any historic benchmarks."
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