Andrew Sieg of Merrill Lynch on bank synergies and acting in clients’ best interest

A quick look at Andrew M. Sieg’s business card reveals an obvious way Bank of America is changing the firm that brought Wall Street to Main Street.

The card identifies Mr. Sieg as president of Merrill Lynch Wealth Management, a position he assumed in January 2017 after serving as its head of retirement solutions. The card also displays the company’s new logo: its iconic bull next to a bold-type “Merrill” above a smaller tag line, “A Bank of America Company.”

Compared to the name surgeries that took place at other bank units following a recent corporate rebranding — the venerable U.S. Trust became Bank of America Private Bank and the investment banking business known as Bank of America Merrill Lynch became BofA Securities — dropping the “Lynch” part of the brand seems merely cosmetic. But the changes Mr. Sieg and Bank of America top management want to bring about at the wirehouse are far from superficial. Fundamentally, they want to eliminate organizational impediments that stand in the way of maximizing the value of the bank’s vast customer base — empowering its 14,690 brokers and advisers to be more effective at gathering assets and meeting the full range of clients’ financial needs.

To find out where Merrill wants to go with its Thundering Herd and how it plans to get there, InvestmentNews recently spent some time with Mr. Sieg. Edited highlights of the conversation appear here.

InvestmentNews: Where do you see the wealth management business now?

Andrew Sieg: We’re in a unique and positive period for the industry, and over the next 10 or 20 years I see a bull market for advice. There are probably more American families in need of broad-based financial advice than at any time in the past, driven by the complexity of what they now have to manage. Traditional pensions have faded away and people are on the hook to provide for their own retirement income at a time when the investment landscape is very complicated. The high-stakes decisions that have to be made are a challenge for even the most sophisticated families, which is why we see people of all kinds looking for professional advice. Even when you look at millennials, for example, many studies find they are even more inclined to seek professional advice than baby boomers.

IN: This changing landscape is one of the main drivers of regulatory proposals designed to insure advisers deliver advice that is in the client’s best interest. What’s your view of regulation in that regard?

AS: We’ve been very outspoken in our support for a higher standard of care and a framework that encompasses all the players in our industry. When you think about what our advisers do for clients, we are very confident that in a world of increasing fiduciary standards we are well-positioned to succeed and thrive.

We plan to continue to work with regulators to ensure that clients are protected and that their ability to choose how to pay for wealth management services is preserved.

IN: How do you define ‘best interest’?

AS: I’m not an attorney, and when you really start to parse a rule it becomes a legal discussion pretty quickly. For me, it’s ensuring that we have an expectation enshrined in regulation that a client’s interests come first. It means that we proceed with a real understanding of the client today and their real objectives over time, and that our recommendations are anchored in what’s best for the client, not the adviser or the firm. There also must be a rigor and discipline in the way advice is being generated and delivered, and finally, a commitment over time to maintain and oversee the client relationship.

The transition to serving clients in that manner at Merrill Lynch began more than 25 years ago in the move away from transactional brokerage as the key activity we engaged in toward fee-based investment advisory as a key framework of providing advice. So rather than being an event that will change the direction of the firm dramatically, we think regulation in this area is more of a next step.

IN: Let’s talk about the next generation of advisers. Are you looking for hunter-gatherers who can bring in assets or nurturers who can satisfy clients over the long run?​

AS: We want both, and we want them playing the right role in a team context. All advisers should have strong interpersonal and client skills. They need to be able to engage and develop relationships. But the role of the adviser has become very complex, which is why the business has gone from being one of sole practitioners to one of teams.

About 78% of our advisers now work as part of a team, up from 38% five years ago. When you think of all the knowledge needed and the activities that must be done, it’s almost unimaginable that one person could do it all. With teams, the delineation of roles permits scale and enables us to serve clients with high quality.

For example, we have 4,000 CFPs, making us the largest employer of CFPs in the business. And we have other advisers who have become very sophisticated managers of their own business, managing 25 or 30 people. In fact, one of our most popular management programs is about [financial advisers] as CEO.

IN: Why would these CEO-type advisers stay with Merrill when they can go out on their own as registered investment advisers?

AS:​ The combination of our unique and powerful culture and the unmatched breadth and depth of capability we can offer clients make this an unmatched platform for financial advisers. You can talk about providing a comprehensive relationship, but it’s challenging to walk that walk unless you have a platform that can deliver it, and we think that ours is the most powerful platform for advisers to serve clients and for advisers to grow their practice.

You know, it’s not easy or inexpensive to make an icon on a smartphone do everything the customer wants. Here, advisers can benefit from a company spending more than $3 billion a year on technology and giving them many other resources to support the growth of their business. There’s also new energy and support of the brand in the marketplace. If you decide to become an independent adviser, you lose most of what I’ve described.

IN: Have the support and investment paid off in terms of more new clients for advisers and the firm?

AS: In the first half of the year, we achieved record net new household growth, up 45% compared to the first half of 2018. Our average adviser will bring on six new households this year, which is a threefold increase over three years ago, and retention is very strong. Before we embarked on what we call our responsible growth strategy, in a typical year on a net basis Merrill Lynch would bring in 5,000 new households. In the first half, we brought in 11 times as many net new households as we did in the first half of 2017.

We’re also seeing a meaningful percentage of new relationships being referred to us by the consumer bank. Last year, approximately 12% of the 54,000 gross new relationships brought in came via a referral from the bank. This year, our advisers are on track to bring in 70,000 gross new households, and in the second quarter, 10% of new Merrill Lynch client relationships came as the result of a referral from another area of the company.

IN: How did you break down the silos?

AS: Credit for that goes to Brian Moynihan. When you have a leader who’s made it clear he doesn’t want internecine P&L concerns and management lines to interfere with bringing everything together for the benefit of the customer, the strategy can make a lot of progress very quickly.

But the integration isn’t just pushed down from the top; it’s being brought together at the ground level through local market presidents in 90 markets around the country, whose job it is to make sure all lines are working together and that integration is happening. Twice a year for 10 years, senior BofA team and market leaders [have] come together to gauge progress on integration.​

The payoff for clients is that we can deliver what they have been asking for for 25 years: the ability to see everything in one place. Whether they access their BofA account or their Merrill account, they can see all their investment, banking and retirement accounts and loans in one view. This enables financial advisers to give practical advice about cash flow, monthly budgets and spending goals, which covers the full range of activities in a client’s life, not just investments.

IN: What changes have you made in the management of the business?​

AS: The view across BofA is that frontline managers are critical to success. After 15 or 20 years of the pendulum swinging in the direction of reducing frontline managers’ ability to make decisions and having their authority and compensation come down while being asked to do more, we’re trying to move the pendulum the other way.

To make that a reality, we created a rapid development program for about 102 market executives, and I’m involved personally in their training and development. The executives are all senior, nonproducing field managers, with about 150 financial advisers, on average, under each of them. These executives are in receipt of the overall strategy of BofA and Merrill and are responsible for translating it, making the necessary changes in the field and delivering performance. My strategy is to have as little distance as possible between me and them.

Last year, for the first time, we held a three-day training program for the group and asked them to create a written plan about the challenges, opportunities and key initiatives they are driving in their market for this year and for the next two years. Each then came to New York so I could spend one-on-one time reviewing their plans. This helps me understand each market, assess talent and galvanize the focus of our marketing executives on the growth of the Thundering Herd and delivering on our aspiration to serve clients on a high level. We’ve also asked the 102 market executives to join a staff call every Monday in an effort to improve communication and provide access to senior management.

IN: How is Merrill addressing diversity and inclusion?

AS: One theme at the core of the modern Merrill is the need to drive more diversity among the ranks of leaders and advisers. Obviously, there is a moral imperative for this, but also a very strong commercial imperative to better reflect the profile of the marketplace of the 2020s, where women increasingly are decision-makers, where people of color are growing wealth at rates in excess of growth rates generally and where the LGBT community has $1 trillion in purchasing power.

Currently, more than one-third of our financial adviser trainees are women, which is not where we’d like to be, but that does represent progress. And financial advisers are now realizing that it is quite difficult for them to have a dialogue with the next generation unless they have a millennial on their team. They are also realizing that as advisers age, clients want them to have a succession plan.

Until two years ago, we never built diversity into the scorecard of how we measure advisers and their managers — or the growth that we wanted. Now that we’ve incorporated both, we’re seeing significant progress.

Related Topics: Bank Of America Corp., Merrill Lynch