Bank of America sees decline in income for wealth group

CEO Brian Moynihan calls the wealth management group 'the least efficient business in the platform.'

Despite the broad stock market’s rise over the past year, with the S&P 500 up almost 19% in that time, Bank of America’s Global Wealth and Investment Management group, which includes Merrill Lynch, reported net income Tuesday morning of $1 billion in the quarter that ended in September, a decrease of 13% compared to the same period last year.

The wealth business reported third-quarter revenue of $5.3 billion, a decline of 2%. That decrease was driven by lower net interest income, which was partially offset by higher asset management fees as a result of higher market levels and asset flows from clients, according to the company.

The bank, which does not provide an advisor head count per business line, reported 19,130 client-facing wealth professionals across its various business lines, a year-over-year increase of 289 advisors.

But it appears Merrill Lynch is having a hard time hanging onto its most experienced, and profitable, financial advisors.

According to InvestmentNews data, which tracks brokers and financial advisors joining or leaving the broker-dealer Merrill Lynch Pierce Fenner & Smith Inc., Merrill has seen a net loss of 298 financial advisors this year through the end of September.

Meanwhile, Bank of America CEO Brian Moynihan pointed to the wealth management group as a weak link in the bank’s chain of businesses in a conference call with analysts Tuesday morning.

When asked about the bank’s efficiency ratio, or its ability to use assets to generate income, Moynihan responded: “One of the big differences between us and other companies you can compare us to is the size of our wealth management business relative to the size of the company is large,” according to a transcript of the conference call. “And as you know, that’s a business which we continue to work to make more efficient, but is the least efficient business in the platform.”

Some firms are clear winners when it comes to picking up financial advisors from Merrill Lynch, which has some of the highest-producing advisors in terms of annual revenue in the industry, according to InvestmentNews data.

Morgan Stanley and J.P. Morgan Securities hired the most Merrill Lynch advisors so far this year, respectively picking up 110 and 107 wealth professionals. LPL Financial, which is largely a broker-dealer for independent contractor reps and advisors, has recruited 63.

According to InvestmentNews data, which tracks financial advisors coming from and going to broker-dealers, 494 advisors have joined Merrill Lynch so far this year, while 792 have left.

As experienced Merrill Lynch advisors leave, the firm is focused on building Merrill Edge, its online and electronic trading platform, said one industry executive, who asked not to be named.

A company spokesperson declined to break out the number of advisors at the various segments of Bank of America’s Merrill Lynch franchise but added that Merrill has seen five consecutive quarters of advisor head count growth on a net basis.

The spokesperson also said the company “disagreed” with InvestmentNews’ tally of financial advisors coming and going adding up to a net loss so far this year for Merrill Lynch. “We would be in a better position to know than a third party,” the spokesperson added.

What’s not clear is how much of that reported growth number of 289 comes from financial advisor trainees or recent hires that staff call centers. Andy Sieg, former president of Merrill Lynch Wealth Management, said in January that the firm would continue to focus in bringing in new advisors this year. It’s not clear what’s happened to those plans since Sieg left Merrill at the end of March. He has been replaced by co-heads Lindsay Hans and Eric Schimpf.