With DOL fiduciary rule looming, Merrill sees surge of AUM

Long-term flows to accounts that charge an asset under management fee were up 54% in the first quarter.

Merrill Lynch, Bank of America’s wealth management business, saw a surge in advisory assets in the first quarter of 2017, months after the company said it was eliminating charging commissions in new retirement accounts as a response to the Department of Labor’s pending fiduciary rule for brokerage accounts.

As part of its first-quarter earnings release on Tuesday, the bank’s global wealth and investment management group reported record long-term flows to accounts that charge an asset under management fee of $29.2 billion for the quarter that ended in March. That’s an increase of 54.5% over the final quarter of 2016, when the global wealth group reported $18.9 billion of asset under management flows, according to the company. For the same quarter in 2016, the company reported negative long-term flows to assets under management of $600 million.

The asset management flows reflect net new assets as well as clients shifting IRA brokerage accounts that charge a commission to those that charge an AUM fee. The company did not break out the difference between net new assets and assets that had moved from commission accounts.

“Our wealth management business had strong asset under management flows,” said the bank’s CEO, Brian Moynihan, in a statement. “The U.S. economy continues to show consumer and business optimism, and our results reflect that.”

The surge in advisory assets comes in the wake of Merrill Lynch saying last October it would no longer offer new, commission-based IRAs starting this year. The firm’s clients who had assets in IRA brokerage accounts would have the option to transition onto Merrill One, the firm’s investment advisory platform, or onto Merrill Edge, where clients can use the firm’s self-directed brokerage platform or its robo-advisory services.

Merrill Lynch was the first — and one of only a handful of firms — to announce such a shift away from charging brokerage commissions in retirement accounts because of the pending DOL rule, which was slated to take effect April 10 but has been delayed at least 60 days. Last month, Merrill gave itself some wiggle room regarding the rule’s implementation when the head of Merrill Lynch wealth management, Andy Sieg, said the firm may back off from the wholesale scrapping of commissions in retirement accounts.

Meanwhile, the headcount of Merrill Lynch brokers declined by 145 during the quarter and totaled 14,484 at the end of March. For the 12 months ended in March, Merrill Lynch saw an adviser increase of 72. The decline of the number of advisers in the first quarter of 2017 was due to a combination of seasonally lower hiring during the quarter and an expected increase in the number of advisers retiring, according to the company.

Merrill Lynch Wealth Management reported revenue of $3.8 billion, an increase of 5% for the last three months of 2016 and up 3.1% for the prior 12 months, according to the company.