Merrill Lynch Counting on a Boost in Household Clients This Year
Merrill Lynch Wealth Management expects to add 47,000 new households to its FAs’ client rosters this year — 40,000 or 6.5 times more than the households they added two years ago.
That bullish forecast, based on an annualized analysis of first quarter results, was offered by Merrill Lynch Wealth Management head Andy Sieg, who spoke at an industry conference earlier this week.
The household growth is “my favorite party of the story,” Sieg told the audience.
Sieg’s sentiments are not surprising — and appear more than a little self-congratulatory, given that two years ago he introduced FA compensation changes that rewarded FAs for adding households to their client roster and punished them if they failed to do so.
Those changes to the FA compensation are not “solely” responsible for the dramatic uptick in Merrill Lynch’s new households now unfolding, Sieg cautioned.
But the changes — which were unquestionably “very visible” — have led to compensation of 2% higher for FAs meeting the targets and 2% lower for those who fail, Sieg said.
Before the changes were implemented, FAs were bringing in on average two-and-a-half clients and losing two a year, Sieg said. In comparison, the same averages today are six new clients per FA and two lost clients — or a doubling of net new clients for the average advisor, he added.
“This was controversial when introduced,” Sieg conceded about his carrot-and-stick FA compensation strategy. “However, today, it’s something that I think our financial advisors and most in the marketplace who look at this kind of realized this provided kind of an impetus and a reason to focus on growth that had gone by the wayside for a period of time in our business.”
Meanwhile, Sieg told his audience to expect Merrill Lynch to add more FAs. “The thundering herd will be growing,” Sieg said.
But notably, not from its recruiting of FAs from rivals, according to Sieg.
Why won’t Merrill Lynch attempt to poach veteran FAs from competitors?
“We think the economics of advisor recruiting are very challenging. We think the cultural impact of advisor recruiting can be negative. We see a lot of evidence that movement of advisors on this basis at scale around the industry doesn’t serve clients particularly well with regard to disruption,” Sieg said.
Instead, most of Merrill Lynch’s new FA hires will start with Bank of America’s roboadvisor offering, Merrill Edge; then, after a few years, they'll transition to the wirehouse’s core FA training program, Sieg said.
In recent years, its traditional FA roster has grown about 1% per year, Sieg said. Merrill Lynch and its parent BofA employed 17,534 financial advisors in the first quarter of this year, compared to 15,323 in the same time period five years ago. But some of the growth in the FA roster is outside its wirehouse and other traditional FA units. About 16% of the FAs employed by BofA now work its consumer banking division, compared to 11% five years ago.