Merrill Lynch fee-based revenue reaches record high

Merrill Lynch hired 475 net new financial advisers, but revenue from the largest business unit of Bank of America Corp.'s Global Wealth and Investment Management division fell 1.9% to $3.43 billion. And while fee-based revenue hit a record, that level may not be hit again in the next few quarters. The quarter was a tumultuous one for Merrill Lynch, as Sallie Krawchek, leader of the wealth management division, was ousted as part of a management restructuring at parent Bank of America. Despite unrelenting bad news from the country's largest bank, Merrill both added to its adviser ranks and attracted $4.5 billion in new long-term assets to the firm. “Considering all that happened with Bank of America this quarter, the results look surprisingly good,” said Alois Pirker, research director for Aite Group LLC. “The positive asset flows and the addition of new advisers are clearly positive, and when the markets get better, that should help them perform better.” According to company spokeswoman Selena Morris, many of the new advisers are trainees without existing books of business. Merrill also hired 31 “financial solutions advisers” — salaried employees who service self-directed investors in the Merrill Edge financial platform. That, in part, explains the drop in adviser productivity from $893,000 per adviser at the end of 2Q to $854,000 at the end of September. Revenue from brokerage transactions also was down, however, reflecting lower market activity, according to the company's earnings presentation. Merrill said it earned record asset management fees for the quarter. The company does not disclose fees and brokerage revenues separately. The quarter could represent a high-water mark for the fee-based side of the business, though, as fees are charged in arrears on assets at the end of the previous quarter, Mr. Pirker said. Assets in fee-based accounts fell from $661 billion last quarter to $617 billion at the end of the third quarter. “The markets were so shaky, and it showed up in the brokerage activity,” Mr. Pirker said. “They'll likely see the impact on the fee-based business next quarter.”