By Michael Wursthorn
While profit from wealth management slipped in the first
quarter, Bank of America Corp.'s (BAC) Merrill Lynch made progress
in the push to get its brokers to move client assets onto a new
advisory platform and increase fee-based business.
The brokerage firm, led by John Thiel, said on Wednesday that
51% of its more than 14,000 advisers have half their client assets
on Merrill Lynch One, which is meant to replace five aging
platforms, each with its own fee schedule, enrollment process and
website, before the end of the year.
So far the firm has $325 billion in assets on the platform, $242
billion being converted assets already managed by the firm, while
$82 billion represented net new flows. That is more than double the
$157 billion that resided on the platform in October.
That work contributed to an 11.4% jump in asset-management fees
to $1.65 billion in the first quarter from a year earlier, which
helped compensate for the lower transactional revenue in the bank's
global wealth unit that Merrill is housed in. Long-term asset
flows, which include fee-based relationships, grew by $4.1 billion
from the previous quarter to $13.5 billion. Merrill now oversees
$2.04 trillion in client assets.
For some time now, the brokerage industry has put more emphasis
on accumulating fee-based assets since the revenue generated is
steadier and more predictable compared to transactional fees, which
tend to be seasonal and less predictive.
But in Merrill's case, the conversion to Merrill Lynch One also
means some clients, including those with accounts on one of the
most popular older platforms, will be charged a higher fee, The
Wall Street Journal previously reported.
Merrill's headcount increased to 14,183 advisers, 98 more than
the fourth quarter of last year. A number of those new additions
are from Merrill's adviser training program, which graduated 146 in
the first quarter.
But average adviser productivity across the firm fell to $1.04
million from $1.07 million in the fourth quarter. Bank of America
Chief Executive Brian Moynihan said the drop was due to
reinvestment in the brokerage.
"The productivity per adviser in our business is extremely
strong and...[has] structurally been strong for many years and
continues to increase," Mr. Moynihan said in a conference call with
analysts on Wednesday. "You wouldn't mind diluting that to get
faster long-term growth prospects for the business and broaden out
the business, and that's what John and the team are doing."
The segment Merrill is housed in under the bank's global wealth
and investment management unit reported $651 million in net income,
down 11% from a year ago due to lower interest rates and
transactional and mutual fund volumes, and higher compensation
costs. Its pretax margin, a key performance indicator, fell two
percentage points to 23%.
But Bank of America also reported that its global-wealth unit
saw loan balances grow to $131 billion, up 10% from the
year-earlier period. Also, greater collaboration across the
organization led to the attraction of 472 funded institutional
retirement plans in the first quarter and $2.7 billion in assets,
which is 139 more plans than the first quarter a year earlier.
On the call, Mr. Moynihan said that "interaction" between wealth
management and Bank of America's other channels is a competitive
advantage over its rivals and will play a key role in further
growth.
Write to Michael Wursthorn at michael.wursthorn@wsj.com
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