Merrill Lynch's thundering herd reeled in 53,000 new clients in 2018

The recent shift in Merrill Lynch's pay plan for its thundering herd of brokers and financial advisers looks like it is paying off, as Merrill Lynch Wealth Management on Wednesday reported record annual revenues of $15.9 billion.

Its 14,796 advisers are responding to pay incentives that spurred them to hustle after new accounts and clients, reporting about 53,000 new client relationships in 2018, according to the company. That is approximately double the firm's average annual run rate since its acquisition a decade ago by Bank of America Corp.

Merrill Lynch's "advisers have rallied around growth," said Andy Sieg, president of Merrill Lynch Wealth Management, in a conference call with reporters Wednesday morning. "The thundering herd is on the move. And it's just the beginning of what we can do."

In late 2017, Merrill Lynch unveiled its pay grid for 2018. Merrill Lynch advisers who brought in a healthy number of net new accounts were to be rewarded, while those who fell short of the new company goals would have their compensation cut. The plan was called the "growth grid."

Mr. Sieg said a record number of financial advisers reached lofty goals of $1 million and $5 million in annual fee and commission revenue last year, and that was driven by the firm's record number of new household accounts. He did not state the specific number of advisers reaching those levels.

Experienced Merrill Lynch advisers last year added 4.6 new client relationships on average, according to the company.

Mr. Sieg reiterated that Merrill Lynch had no plan to exit the protocol for broker recruiting, which makes it easier for a broker or financial adviser to leave one employer and move to another, often receiving a bonus from the new firm to make such a change. In the autumn of 2017, two competitors of Merrill Lynch, Morgan Stanley and UBS, upended the retail brokerage and wealth management businesses when they left the broker protocol.

Meanwhile, Merrill Lynch reported 14,796 financial advisers at the end of December. That was 42 fewer advisers than at the end of the previous quarter, and 157 fewer than at the end of 2017, or a decline in total headcount of 1% for the year. Mr. Sieg attributed the slight decrease in the thundering herd's numbers to higher performance expectations in Merrill's adviser training program that resulted in some advisers leaving and a slightly elevated level of attrition.

"The size of the training class is down a little bit, and that's what takes total Merrill Lynch headcount down," he said.