The herd is thundering as strong markets buoy BofA Merrill Lynch

BofA Merrill Lynch continues to see its adviser ranks shrink, but average productivity is growing, topping $1 million for the first time thanks to strong markets.
AUG 16, 2013
Adviser ranks continue to shrink at Merrill Lynch but the company's financial performance continues to improve. A stable economy and favorable capital markets contributed to a strong second quarter for Bank of America Merrill Lynch — particularly in its wealth management business. The Global Wealth and Investment Management division, which includes the Merrill Lynch brokerage and the private bank U.S. Trust, posted quarterly records in revenue, profits, asset management fees and loan balances. Overall, the business reported pretax profit margin of 27.6%, also a record. “These are phenomenal numbers,” said Alois Pirker, research director at consultant Aite Group LLC. “The big firms are finding fertile markets with investor confidence returning.” Last week, Wells Fargo & Co, the first wirehouse to issue its second-quarter report, also posted strong results. Despite ending the quarter with 304 net fewer wealth advisers across the division, the Global Wealth and Investment Management division, which includes revenue was up 9.9% from the second quarter of last year to a record $4.5 billion. Profits jumped 37% to $758 million. New long-term-asset flows of $7.7 billion were less than half the more than $20 billion the company received from new and existing clients in the first quarter, but the period marked the 16th consecutive quarter of positive inflows at the brokerage. “I thought the inflows number would have been stronger, but it's still not bad,” said Mr. Pirker. “We'll probably see that improve further as we go forward.” At Merrill Lynch, revenue increased more than 10% to $3.7 billion, and its pretax profit margin rose to 26.3%, according to supplemental information provided by company spokeswoman Susan McCabe. The company does not disclose Merrill's net profits separately. The decrease in the number of advisers “was driven by attrition of underperforming [practice management development] trainees,” according to spokesman Matt Card. The firm has shed more than 1,000 advisers in the last year — in part due to the sale of BAML's international wealth management business to Julius Baer Group last August, said Mr. Card. The company did not disclose how many advisers worked in the international operations. The drop in head count and increase in overall revenue contributed to a surge in adviser productivity, with the average Merrill adviser producing more than $1 million in revenue for the first time in the brokerage's history. “They lost a lot of advisers but there were obviously a lot of low-end producers, given the productivity numbers,” Mr. Pirker said. “There were probably some bigger defections among those 1,000, but it doesn't seem to have hurt them significantly.” Mr. Pirker is expecting Morgan Stanley to continue the roll of strong earnings results for the large Wall Street firms. The company, which reports Thursday, has posted 17% pretax margins in the last two quarters — still short of chief executive James Gorman's target of 20% when he engineered the merger of Morgan Stanley and Smith Barney in 2009. “I expect Morgan Stanley to hit it out of the park tomorrow,” Mr. Pirker said. “It's going to be a higher margin than in the first quarter and it may be near Merrill's number.”

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