Merrill Lynch Gains Brokers -- at a Price
January 13 2017 - 2:26PM
Dow Jones News
By Michael Wursthorn
Bank of America Corp.'s Merrill Lynch broker headcount climbed
by more than 100 at the end of 2016 from the year before, but
average revenue generated per broker continued its recent
downtrend.
Merrill has been putting more emphasis on boosting its broker
headcount through the training new brokers instead of focusing on
the costly practice of poaching experienced brokers from rivals.
But those trainees are tasked with building their own client roster
from scratch, and they don't immediately contribute revenue and
assets to the firm, pulling down the average productivity of its
brokers.
In the fourth quarter, average yearly productivity per broker
fell to $964,000 from $996,000 a year earlier and $983,000 in the
third quarter of 2016. According to the firm, annualized average
productivity for experienced brokers -- excluding those in the
firm's training program -- was $1.25 million per adviser in the
first quarter, down from $1.3 million a year earlier.
The number of full-service brokers increased to 14,629 as of
Dec. 31, up 129 from the same period in 2015. A spokesman
attributed the broker gain to an influx of recruits from Merrill's
training program, as well as recruitment from rivals and low
attrition of experienced brokers. A Merrill spokesman declined to
break out those metrics further.
Merrill has been increasing its broker headcount at a time when
its brokerage rivals have been shrinking or flat. Wells Fargo &
Co., which also reported fourth-quarter results Friday morning,
said its adviser headcount shrunk by 1% to 14,882 from a year
earlier. Morgan Stanley and UBS, which haven't reported
fourth-quarter earnings yet, both saw quarter-over-quarter declines
in broker headcount in the third quarter.
Merrill, like other firms, has been looking at alternatives to
boost headcount, assets and revenue. Traditionally, brokerages
relied on recruiting to boost metrics, but the practice has grown
more costly in recent years as pay packages ballooned to entice
brokers from one another. Those recruitment packages took a hit
this past year as new regulations imposed on retirement accounts
have forced changes to how they are structured. And UBS Group AG
said in June it would spend less on recruiting brokers to better
pay those who currently work for the firm.
Despite the focus on growing through its training program,
Merrill has been recruiting. It announced the hiring of two brokers
from Comerica Bank in December and another pair from J.P. Morgan
Chase & Co. in October. In September, it hired three UBS
brokers who managed about $750 million in assets altogether, as
well as a Morgan Stanley broker who oversaw $240 million.
Bank of America's global wealth and investment unit said revenue
fell 2.3% to $4.4 billion for the quarter as higher
asset-management fees weren't able to offset lower commission
revenue. Broadly, Bank of America reported its biggest annual
profit in a decade, though revenue was lower than analysts
expected.
Merrill Lynch contributed $3.6 billion to the unit in the fourth
quarter, down 2.5% from a year ago.
Client balances at Merrill rose 6%, or $116 billion, to $2.1
trillion from a year earlier. The bank said the higher balance
reflected strong net inflows.
The bank's wealth unit, which also includes private bank U.S.
Trust, continued to increase the amount of loans taken out by
customers. Average loan balances rose 7% from last year to $146
billion.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
January 13, 2017 14:11 ET (19:11 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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