Merrill Is Fighting to Retain Talent and Clients After Record-Setting Quarter

(Bloomberg) -- Bank of America Corp.’s wealth-management business set records last quarter as soaring equity markets made legions of Americans newly rich. With the boom, however, comes intense competition across Wall Street to lure wealthy clients and retain advisers at risk of being poached.

The company’s Merrill Lynch Wealth Management unit reported its highest quarterly revenue ever in the three months through September. But challenges remain: The firm has lost employees who’ve formed their own firms or joined competitors -- part of the reason Bank of America’s overall roster of wealth advisers slumped to 18,855 in the third quarter, down 8% from a year earlier.

“This is a very strong war on talent, but this has been a competitive marketplace in wealth management for certainly my whole career, which is three decades in the business,” Andy Sieg, president of Merrill Lynch Wealth Management since 2017, said in a Bloomberg Television interview Friday. “We’ve got a lot of strength to let us battle that war for talent without seeing costs running away from us.”

The demand for advisers comes as banks bolster their business of serving affluent clients. JPMorgan Chase & Co. is boosting compensation for wealth advisers, UBS Group AG is starting a digital wealth manager in the U.S. and Citigroup Inc. is making a big push in the space, including plans to hire some 2,300 staffers in the Asia-Pacific region.

In an attempt to set it apart from competitors, Merrill is focusing on modernizing its business through technology.

“We’re not your father’s brokerage firm,” Sieg, 54, who joined Merrill Lynch in 1992, said in a separate interview with Bloomberg. “We’ve broadened the appeal of our brand through digital, high-tech, high-touch.”

Merrill also is trying to strengthen its employee base by building the next generation of advisers from within. Roles in wealth management are open to employees across the company, including staffers in consumer and global banking and markets, as well as external candidates.

It also revamped a training program this year to help advisers develop leads through other business lines at Bank of America, which took over Merrill Lynch & Co. during the global financial crisis more than a decade ago. Merrill aims for roughly 1,000 new adviser graduates a year. It’s targeting an eventual 80% graduation rate from the program, up from the current industry rate of less than 30%.

‘Not Realistic’

In a bid to hold onto advisers once they’re in place, Merrill is focusing on employees’ careers right through retirement, when they can pass off clients and capture “the full career arc,” Sieg said. In the third quarter, attrition among experienced advisers returned to just under the firm’s average of 4% over the past decade.

“My objective is to have 100% retention among advisers,” but “that’s not realistic,” Sieg said. “It is a very competitive marketplace,” with companies placing a strong “emphasis on recruiting.”

To maintain competitiveness, Merrill recently tweaked the way it compensates its staff. Advisers will continue to get a percentage increase or decrease based on the number of new households they bring in annually, but now the payout will also be based on a rolling 12-month period -- the industry standard.

Bank of America’s Merrill Lynch global wealth and investment-management businesses, which saw a 19% increase in revenue in the third quarter, accounted for $4.5 billion of the Charlotte, North Carolina-based bank’s roughly $23 billion in total revenue for the period. With $3.1 trillion in client balances, Merrill is among the largest wealth-advisory firms in the world, behind UBS and Morgan Stanley.

Retaining and adding advisers is important for Merrill to keep up with rising demand from a growing number of younger wealthy people. Clients under the age of 45 represented 20% of Merrill’s net new households in the third quarter, double the portion five years ago, according to the firm. New customers -- along with the stock market’s bounce-back from the early days of Covid-19 -- helped Merrill increase client account balances.

“There is a bull market for advice,” said Sieg, who keeps a miniature statue of the bull from the Merrill logo on his desk at Bank of America’s New York offices, at One Bryant Park. There’s a “tight correlation between exciting economic growth and overall wealth increases” across the U.S.

Sieg said he believes Merrill’s long history and its backing by Bank of America and the other financial services it offers will help the firm retain a top position within the wealth-management industry.

“Advisers are also realizing there is no platform like ours to serve high-net-worth clients,”  he said.

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