Merrill Lynch will not offer a way for financial advisors to independently affiliate with the Wall Street giant, even as industry competitors open up that burgeoning business model, Merrill's wealth management head said Thursday.
Andy Sieg, the president of Merrill Lynch Wealth Management and a member of parent Bank of America's executive management team, spoke about his plans for the next 10 years and the unit's talent and technology agenda in a
Mindy Diamond, Diamond Consultants' CEO and founder, hosted the exchange on a podcast that explores how financial advisors are moving into different ways of doing business.
"Independence" refers to advisors who are contractors and own their own books of client business, as opposed to following the conventional model of W-2 employees at a brokerage firm.
Merrill competitor Wells Fargo is one example of a wirehouse that has entered the affiliate space, through its FiNet channel for advisors who want an option beyond working in a firm's traditional formal employee channel. Like other independent outlets at brokerages Raymond James and Ameriprise, FiNet has recruited advisors from employee firms like Merrill.
Speaking about Merrill's goals, Sieg said that "my primary focus has been trying to get this business back onto a growth footing over the last six or seven years." He added that strong investment in tech capabilities for advisors, along with talent development programs and compensation grids that emphasize growth, had paid off.
In the
Looking ahead, he said he was focused on delivering competitive support platforms for advisors and building collaborative relationships among them.
"If I think about the most profound changes in the business over the last 30 years, the shift in this business from being a business of individual contributors to a business built around teams may stand out as the most visible monumental change," he said.
An increasing number of advisors want something different from what Merrill and other wirehouses offer, but "the Merrill model is good enough for the vast majority of advisors," Diamond said, speaking with Financial Planning afterward.
Still, she acknowledged that wirehouses have to face losing top advisors to competitors with different models.
With Merrill's 15,000 advisors, "it's impossible to be all things to all people … That's why there have been a lot of top advisors that voted with their feet" by going to competitors "and many that will continue to."
Still, it's neither the pay nor the tech capacities that advisors cite as their top reason for jumping ship.
"The most important factor is the ability to serve clients with more freedom and control," Diamond said.
An independent channel could have been one such way to address that — but Merrill is choosing a different strategy.
Sieg said he thought that Merrill was obliged under regulatory requirements to supervise brokers in ways that rankled some advisors. "An advisor may leave based on, hey, they're willing to take some of the risk to their own license and their own practice," he said. Still, he added that the benefit of institutional resources and networking with Merrill's famous "thundering herd" outweighed those issues for most advisors.
Below are more of FP's takeaways from the conversation.
Recruiting more big players, prioritizing younger talent
"We do feel like now we're in position to respond in many cases to some of the incoming inquiries that we've had about whether we would offer some experienced advisor recruiting deals. We have an offer that I think is consistent with the market," Sieg said.
He repeated his comments in the company's
Sieg said that while peers were investing heavily in recruiting top advisors, including some from his firm, their upfront costs — in one case, what he said was over 400% of trailing 12-month revenue for a team that he recently lost in the Northeast — were irresponsibly high, in the context of a company's balance sheet.
"We see around us some deals that take place in the market which defy any rational economic analysis in terms of them being accretive to the acquiring firm," he said.
Regarding the team in question, "we've seen what the transition experience has been for their clients. And six months in, less than 50% of the clients have moved."
Bulls moving to herds
Asked if Merrill had plans to add independent channels, given that rivals like Wells Fargo had done so in recent years, Sieg gave a hard no.
"It's something that we've looked at every couple years for 30 years. It has never made sense for us," Sieg said. "That's not only a topic that revolves around products and services and platforms and comp, it revolves around culture, the idea of one unified Merrill Lynch organization out in the world."
Rather, he was more interested in helping the advisor force at Merrill go more in what he called the natural direction of the industry — teams. Currently, 80% of his financial advisors work in teams.
"When you look at people earlier in their career, those numbers are even higher."
Although some advisors prefer to remain independent, the sense of community from working with teams at Merrill and networking with 800 to 1,000 peers and mentors in the firm's Advisor Growth Network provide unique advantages to going it alone, Sieg said. In addition, having a team makes succession easier and retention of client assets, especially in the case of wealthy multigenerational families, a smoother process.
"Clients are becoming more and more outspoken as individual contributor advisors [are] getting to later stages of their careers," Sieg said. "They hear from clients directly, 'Hey, what's going to happen on the day you retire, Mr. or Miss Advisor, who's going to be there for my kids and for my grandkids?'"
By having a younger advisor on a team, senior members can reassure matriarchs or patriarchs that they have what it takes to sustainably manage their wealth.
Growing closer to Mother BofA
Sieg said he doesn't see the wealth unit's integration with parent Bank of America as a problem, as some do. Instead, he finds it a source of pride and competitive advantage.
"Almost all advisors are involved in one form or another in a referral relationship with the broader Bank of America," he said, adding that he intended for Merrill advisors to work "closer and closer" with the rest of the company over time.
Rather than seeing client referrals from the bank to wealth advisors as referrals, Sieg called that process "coordinated client coverage — not something that the word 'referral' kind of conjures up, which on a bad day can feel like tossing an opportunity over the fence to another side of the company."
He pointed out that prior to being acquired by BofA in 2009, there were four or five advisors at Merrill who had north of $5 million of production credits. Now, that's upward of around $250 million.
While some advisors have complained they feel pressure to cross-sell banking products to clients, Sieg said demand for these one-stop banking services was often coming from clients themselves.
"Most clients, one of the things they are frustrated by in the world of consumer banking is, they aren't receiving the kind of white glove service that you get from your wealth management organization."
He said Merrill clients opened 150,000 to 200,000 new checking accounts in a year.
"We're trying to make sure that this set of capabilities inside Merrill and the broader Bank of America, which is unmatched in our industry, is as accessible and as easy to put to work on behalf of clients as possible," he said.
"Because for our advisors, that's among the key differentiators for us as an organization, the ability to do just so much for clients."
