Advisor attrition dropping at Merrill Lynch

Advisor attrition dropping at Merrill Lynch
Although departures of financial advisors may have slowed at certain large firms, that doesn't mean the problem's been squelched.
APR 16, 2024

Large firms with thousands of financial advisors working in various capacities appear to have turned the tide, at least for now, on losing advisors to their competitors or retirement, with Merrill Lynch showing a dramatic decrease in the number of advisors who left in 2023.

According to InvestmentNews data, Merrill Lynch had a net drop of 1,043 financial advisors in 2021, the year after Covid-19 brought most broker movement to a standstill. That fell to a net decline of 703 financial advisors in 2022 and, last year, to a drop of 445, or less than half the amount seen two years earlier.

At the end of last year, Merrill Lynch reported a total of 18,916 client-facing financial advisors across its various business models. In its first quarter earnings released Tuesday, Bank of America Corp., Merrill's parent company, did not report a financial advisor head count.

When asked to comment about the declining pace at which financial advisors are leaving Merrill Lynch, a company spokesperson said: "Over the last two quarters, advisor attrition has remained below the historical average."

The spokesperson did not give specific figures regarding the firm's rate of attrition, which is one of the most closely watched figures in the industry.

Like Merrill Lynch, Wells Fargo Advisors also showed an improvement last year in hanging onto its financial advisors.

For more than a decade, wealth management firms owned by big banks have seen a slow but steady stream of financial advisors leaving to competitors, where they can earn a bigger percentage of the annual revenue they generate through fees and commissions, and also build equity and ownership in their own businesses.

The number of aggregators, or private-equity backed buyers of wealth management firms, has also increased dramatically over the past decade as buyers look to capture the steady earnings stream kicked off by wealth management firms.

Although attrition may have slowed at Merrill Lynch and Wells Fargo Advisors, that doesn't mean it's been squelched, according to industry observers.

"This is driven by circumstances, the market had a great year last year and was up 26%," said Alois Pirker, an industry consultant. "If client balances are up, people hit their bonuses and it’s tough to walk away from those.

"But the aggregators are more active than ever, with some buying other aggregators and others siphoning away financial advisors from the wirehouses," Pirker said. "I don’t think that tug of war is over by any stretch."

"In general, we're seeing a large number of financial advisors leaving the big-bank-owned space and going independent, either to a large competitor, a hybrid RIA, or a fee-only RIA," said Michael Terrana, an industry recruiter and CEO of Terrana Group. "But because of the good market for stocks, along with heightened geopolitical risks, that may have caused a bit of a slowdown in advisors moving."

Meanwhile, Bank of America Wealth Management reported first-quarter revenue of $5.6 billion, a new high, and a 5 percent increase over the same period last year. Net income was $1 billion, a 10 percent increase compared to the three months ended in March 2023, according to the company.

Merrill Lynch is focusing on four areas of its business for financial advisors right now, Lindsay Hans, co-head of Merrill Lynch Wealth Management, said during a conference call Tuesday morning. They are: adding new clients; working more with current clients; investing in financial advisors and their teams; and investing in technology.

“Alternative investments continued to be an area of growth“ during the quarter, said Eric Schimpf, also co-head of Merrill Lynch Wealth Management. Those assets have doubled in five years, he said, without citing specific totals.

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