Over the past 12 months, the broker-dealer field has been in a tremendous state of transition. Now after a string of significant mergers and acquisitions, four major wirehouse players are left in the United States, with two now part of larger organizations.
The latest tally puts Merrill Lynch's advisors ahead in terms of productivity, or trailing-12 month sales, fees and commissions with $824,000 per advisor in the third quarter of 2009. Morgan Stanley Smith Barney reported $662,000 per advisors. (Wells Fargo and UBS did not release comparable figures.)
In terms of the size of the respective advisor forces at the evolving wirehouses, Morgan Stanley Smith Barney comes out on top with more than 18,000. However, Bank of America would be larger – at 19,000 – if its U.S. Trust associates are included. And Wells Fargo can boast having about 21,000 advisors, if its financial specialists are included.
An interesting point to keep in mind is that the former head of Merrill Lynch's financial advisors, Robert McCann, is now in charge of UBS Americas. And UBS' advisor force is roughly half the size of Merrill's. Meanwhile, the size of Morgan Stanley has more than doubled through its deal with Smith Barney.
BofA-Merrill Lynch
Bank of America says its Global Wealth and Investment Management unit had net income of $271 million in the third quarter. "Net revenue increased to $4.1 billion as investment and brokerage service income rose due to the addition of Merrill Lynch and the level of support for certain cash funds declined," the company says.
Merrill Lynch Global Wealth Management net income increased 9 percent to $310 million from a year earlier as the addition of Merrill Lynch was partially offset by higher credit costs. Net revenue rose to $3.0 billion from $1.0 billion a year ago as investment and brokerage income increased, mainly from the addition of Merrill Lynch.
U.S. Trust, Bank of America Private Wealth Management had a net loss of $52 million as net revenue declined and credit costs rose, mainly because of a single large commercial charge-off, according to BofA. Net revenue fell 11 percent driven by lower equity market levels and reduced net interest income.
Columbia Management's net loss fell to $48 million; its Prime Funds no longer have exposure to structured investment vehicles.
Overall retail client assets for the unit were $1.92 trillion, with assets under management of $740 billion and client brokerage assets of $1.23 trillion. The AUM figure reflects net outflows of $88 billion for the past nine months, including $18 billion of net outflows in the more recent quarter.
On its own, Merrill Lynch had asset-management fees and commissions of $1.54 billion in the third quarter, up from $1.43 billion in the second quarter. Its assets under management were $740 billion, and client brokerage assets stood at $1.23 trillion. Overall retail client balances were $1.4 billion.
By comparison, U.S. Trust reported asset-management fees and commissions of $310 million in the same period vs. $331 billion in the second quarter. Total client balances for this group of roughly 4,000 advisors is $315 billion.
In a November 10 presentation, departing BofA CEO and President Ken Lewis says that the integration of Merrill Lynch produced $1 billion of cost savings in the third quarter and $2.2 billion of savings in the first three quarters of 2009, beating the firm's original estimate.
In addition, he says that BofA has retained 94 percent of Merrill's high-producing FAs–now being led by former-Smith Barney chief Sallie Krawcheck–and that it has received some 1,400 referrals from advisors to the commercial bank.
Morgan Stanley Smith Barney
Morgan Stanley's Global Wealth Management Group has posted pre-tax income of $280 million, compared with a pre-tax loss of $1 million in the third quarter of last year. Comparisons of current quarter results with those of prior periods were affected by the results of the formation of Morgan Stanley Smith Barney (or MSSB), which closed on May 31, 2009, the company notes.
Net profit after the non-controlling interest allocation to Citigroup Inc. and before taxes was $197 million for the most recent three months. The quarter's pre-tax margin was 9 percent and return on average common equity was 5 percent.
In addition, net revenues were $3.0 billion, up 91 percent from a year ago, reflecting higher net revenues related to MSSB. Non-interest expenses of $2.7 billion increased 74 percent from a year ago, primarily reflecting the operating results of MSSB and $65 million in integration costs.
Total client assets were about $1.53 billion at quarter-end, up 137 percent from $647 billion a year ago (before the MSSB merger) and up 8 percent from roughly $1.42 billion in the second quarter of 2009.
Client assets in fee-based accounts were $365 billion and represent 24 percent of total client assets. Client assets in the $1 million-and-up client segment represented about 69 percent of total assets.
The number of MSSB global representatives at quarter-end was 18,160 in 930 locations. This FA figure is down about 2 percent from the 18,444 reps reported at the end of the second quarter. A year ago, Morgan Stanley had 8,588 reps.
Attrition, primarily within the lower quintiles, has substantially declined since the closing of the joint venture, says Colm Kelleher, executive vice president and CFO. FA turnover within the top two quintiles was "at historic lows of under 1 percent."
MSSB financial advisors had average annualized revenue of $662,000 in the latest three months, down 1 percent from $671,000 in the second quarter and 12 percent off the $750,000 average of a year ago.
Total client assets per rep were $84 million in the most recent period, up 9 percent from $77 million in the second quarter and an increase of 12 percent from $75 million a year ago.
