Merrill Sees Sharp Drop in New Clients as Asset Flows Weaken

The number of net new client households for Merrill Lynch Wealth Management advisors fell to 22,000 in 2020 from 35,000 in 2019 — representing a 37% decline.

Despite the dramatic drop-off, the company called last year's achievement "pretty extraordinary given the environment," noting that was "four times the pre-2017 household acquisition levels."

The additions included 5,000 net new households in the fourth quarter, Merrill said.

Also, net client asset flows to Bank of America's Global Wealth & Investment Management (GWIM) unit — which includes both Merrill Lynch and BofA Private Bank — were down 21% for the full-year 2020 at $19.6 billion vs. $24.9 billion a year ago, and fell 7% year over year to $7.60 billion in Q4'20.

Plus, the GWIM business reported a 16% year-over-year drop in Q4'20 net income to $836 million from $1 billion. Revenue fell roughly 4% from a year ago to $4.7 billion. Of that total revenue, $3.9 billion came from Merrill, down from $4 billion, while $831 million came from the Private Bank, down from $867 million.

Headcount Issues

In addition, Merrill is projecting low single-digit growth in the number of its advisors annually over the next five years, a senior company executive told reporters Tuesday. The increased advisor headcount would come despite slight declines in this figure for the past two years.

The company expects to achieve an increased number of advisors through the rollout of its advisory division strategy in 2021, the strengthening of its advisor development program, and by increasing the overall success rate of the next generation of Merrill advisors, the executive said.

The number of Merrill advisors dipped by 127 in 2020 and by 429 in the recent quarter to 17,331 as of Dec. 31, 2020; also, the number of Private Bank advisors slipped by 7 from a year ago and by 11 in the prior quarter to 1,759, the firm said, while pointing to the success of its growth strategy despite a challenging year dominated by the COVID-19 pandemic.

The total combined number of Merrill and Private Bank wealth advisors fell by 7 last year and by 300 from the prior quarter to 19,373 on Dec. 31, 2020. The wirehouse ended 2018 with 19,458 advisors.

Merrill's average advisor 12-month trailing fees and commissions (or production) level was $1.17 million vs. $1.11 million in Q4'19. For the full-year, it was $1.13 million vs. $1.08 million in 2019.

Financial Details

BofA's overall results for the last period were down from the year-ago quarter. Total revenues for Q4'20 fell about 10% to $20.1 billion, while net income dropped about 21% from Q4'19 to $5.5 billion, or $0.59 per share.

"The bank overall delivered solid results for the fourth quarter and throughout last year despite a challenging economic environment," the senior Merrill executive said on the call.

The company's Wealth Management business "finished 2020 with record client balances" and assets under management, he said.

The firm's GWIM division reported that its total client assets under management increased 10% from the prior year to $1.41 trillion in Q4'20. Total client balances, which include loans, grew 10% to $3.35 trillion.

Merrill AUM grew 11% to $1.1 trillion, and its client balances increased 10% to $2.81 trillion. Private Bank AUM grew 9% to $313 billion, the firm said, and client balances increased 11% to $541 billion.

"Our success was driven by three factors," the executive said: "First, the continued success of our organic growth. Second, our ongoing investment in our products, platform and people, which furthers our ability to serve clients comprehensively and in ways that remain unmatched in the industry."

Third, he mentioned, was its "advisors' ability to successfully pivot to a new operating environment, maintaining a record level of client satisfaction and continuing to drive growth."

WIM net income fell to $3.1 billion from $4.3 billion for the year, while revenue fell 5% to $18.6 billion due to the impact of low interest rates, it said. Of that total revenue, $15.3 million came from Merrill GWM, down from $16.1 billion a year earlier, while $3.3 billion came from Private Bank, down from $3.4 billion.