Invasion of the Book Snatchers

Merrill Edge Brokers to Get Desks in Wealth Branches - WSJ

Written by Bruce Papps, CFA

April 11, 2019

Managing Partner

Black Ridge Consultants, Inc

Bruce.Papps.wh85.Wharton.UPenn.edu

646.476.6447

The Wall Street Journal reported last Monday that in an ongoing effort to imprint the bank brand onto Merrill, BOA has launched more than 300 "Financial Solution Advisors" (FSAs) to span out and into Merrill branches in order to "assist" FA's to generate next generation clientele (i always get very suspicious whenever anyone comes out to help or 'assist' me in anything much less were it regarding my book).They will seek foray into your book surreptitiously under the guise of doing it for the children of the clients. These FSA's initially plan to infiltrate Merrill's ranks for the purpose of interacting with the children of clients whom are tech savy with smaller initial account sizes (Merrill FA's do not get paid on accounts under $250k).

This is not unique to Merrill. Wells Fargo has similar functioning salaried FSA's in place and Morgan Stanley much more coyly is calling their functionally equivalent rep a 'digital marketing' advisors. One thing is certain, however, and that is that all the major firms are aligned with a common objective and are even joined by the regulators - including their shills in Congress - to put the advisor on salary.

These are some rather formidable forces all focused together at a very transformational time for the industry (demographically, technologically, etc). To accomplish this type of dramatic change, increasingly rapid smaller changes will first be observed occurring.

Changes are clearly accelerating. About a month ago news broke that BOA had launched a re-branding of all things Merrill. US Trust ceased to exist and Merrill became as "sub-brand" for BOA's four retail investing and wealth management offering with new signage, advertisements and business cards that declare Merrill "a Bank of America company" (read this story here at BOA's ReBranding of Merrill)

Then just last week, I wrote about the recent overhaul of Merrill's training program so as to align it with the bank side training program (see Merrill's New Training Program: Indoctrination Camp for Bank Products ).

And now, as just reported by the Wall Street Journal, BOA has started sending Edge Advisors into select branches on certain days to cross sell your clients and drill more deeply into your books. They intend to cross sell your book by offering additional edge accounts to your wealthy clients and targeting your client's children and these children's Do It Yourself (DIY) generational attitude.

As expressed in my many articles https://www.dhirubhai.net/in/brucepapps/

the powers to be (including the regulatory gods) want all advisors on salary.The fact that this initial foray of bank advisors into Merrill offices are salaried advisors should not be lost on anyone. Wells Fargo also has their salaried FRA's mimicking a similar role as these FSA's at Merrill. You are seated in the front row to observe how the image of the future wirehouse advisor is being 'molded' right there in front of your very eyes. It makes me cringe when remembering what an old school advisor of but just a couple decades ago was like. One's book was sacrosanct and a cultural attitude that a book was open for the firm to assay and penetrate at will would have been ridden out of town on a rail (tarred and feathered). Sovereignty reigned supreme and everyone understood that one's book was the only thing that preserved the advisors value on the street.

Advisors voted with their feet and those firms that didn't respect the sanctity of the advisors book died a quick death on the street. Similarly the advisor that did not respect the integrity of his own book also did not survive. Funny how the more things change the more they stay the same. This has been, is and always will be the Golden Rule on Wall Street. But never before has this Golden Rule been under attack as it is is now and the surviving advisor better be nimble on his feet for the coming vote. Firms have a sophisticated arsenal of tactics ready to employ against the advisor including entangling, hobbling and compartmentalizing the advisor.

This idea of 'entanglement' is not a new one at the bank. In fact, after graduating Wharton I was hired off campus by Nations Bank and wound up in Tampa working under Ken Lewis a then upstart and lowly regional president at Nations Bank in Tampa (see picture of me with my arm around Ken Lewis at end of this commentary).

But Ken knew how to grow and grow he did. When I joined the bank they had $100 million in assets and when Ken left as Chairman of Bank of America they had grown to the largest bank in America. The undying principle drilled into all of us at Nations Bank was the concept of entanglement, "If you cross sold your clients they would never leave". We see this founding principle at BOA now being weaponized against the rank and file advisor at Merrill.

Transformation begins slowly but always reaches a tipping or inflection point after which its rate of change occurs with mind numbing speed. This pattern results from the rising consciousness that is associated with transformational change. I portend that more and more advisors are waking up and realizing what exactly is unfolding and this is accelerating the approach towards that inflection point (it is always best to respond prior to any such inflection point).This awakening is reflected in the statistics involving significant movement of advisors into the regional and independent firms. The regulators and the management of these wirehouses both want the end to the commission structure. They both want the advisor on salary. Do not dismiss it as too unrealistic to imagine that a major wirehouse throws Ol' Liz Warren a bone and says something to the effect that; "you're correct, the root of all problems is the greedy advisor and the commission structure. Starting now all our FA's are on salary" <don't think that can happen? go talk with a HSBC advisor who came to work and was told is now on salary a few years ago>.

And what of the attitude and culture at Merrill after such an invasion of bank side FSA's intent on parsing the books of Merrill advisors? Can such disrespect ever be walked back? What about an environment in which bank FSA's are roaming around Merrill branches like so many brown shirt youth. Will there be political pressure to cow-tow to the bank party line because one knows there is a "bank spy" in the office? Will a Stalinesk dampening of interpersonal relationships occur? All these conflicts will accelerate transformation in the wirehouse at increasingly breakneck speeds.

The astute advisor must also exploit change for their own self benefit. This paradigm shift wherein 40% of all advisors are retiring in the next several years is perhaps one of the most trans formative forces ever impacting the wealth management industry. It is the underlying cause for these transformational changes at the wirehouses and should equally be leveraged by the individual advisor as well. This unique period in history gives the advisor a once in a history opportunity to gather assets in a way that has never really been fully utilized previously; namely, through Asset Aggregation.

Acquiring a lifetime of assets in one deal is the exciting part of the deal market currently. With almost half of all advisors retiring in the next few years, many firms are demographically distorted and are using assets associated with retiring brokers to craft deals to entice advisors to transition to their firms.

This is a particularly robust strategy utilized my myself and Black Ridge to respond to the transformations occurring in the wirehouse world. In this way the advisor under siege can respond by acquiring a 300% to 400% of trailing 12 deal with a $200 to $300 million book embedded into that deal. The transformational challenges facing advisors has never been as intense as now but then again never before has such rewarding opportunities abounded for an advisor willing to react.

To be provided the cutting edge strategies and methodologies utilized at Black Ridge Consultants with respect to Asset Aggregation please complete this form AA Strategies Request  

Bruce W. Papps, CFA

Bruce is founder and managing partner of Black Ridge with more than two decades of industry experience as an investment advisor in positions as vice president at Merrill Lynch, Lehman Brothers, Oppenheimer and Bank of America. Bruce also successfully owned and operated Papps Capital Group, Inc an independent investment advisory firm for over ten years and which he later transformed into a RIA and sold to private equity. With decades of diverse advisory experience, Bruce launched Black Ridge Consultants as a boutique style recruitment and asset aggregation firm specializing in servicing the needs of today’s investment advisor.

Currently, Bruce is a member of the CFA Institute, a charter member of the Penn Club of New York, The CFA Society of New York and vice president of The Wharton Club.

Bruce possesses the pedigreed Chartered Financial Analyst (CFA) designation and holds a B.S. in Economics and Finance from The Wharton School of The University of Pennsylvania.

Black Ridge Consultants, Inc.

40 Wall Street Suite 2800

New York, NY 10005

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bpapps.blackridge@gmail.com

www.blackridgeconsultantsinc.com

Merrill Edge Brokers to Get Desks in Wealth Branches–Report

by AdvisorHub Staff | April 8, 2019

Bank of America is putting about 300 “financial solutions advisors” who were trained to work with bank-branch clients into traditional Merrill Lynch brokerage offices, according to a published report.

The plan aims to develop younger, less affluent prospects than those served by traditional brokers, and further imprints the bank brand on the Thundering Herd of Merrill’s almost 15,000 brokers. It was reported earlier Monday in the “Wall Street Journal.”

FSAs, who until now have worked in call centers and at bank branches under the Merrill Edge flag, will be deployed to Merrill Lynch wealth offices in major U.S. cities, according to the report. Bank of America currently employs about 2,700 low-service Edge brokers.

The move comes as traditional brokerages of all sizes are contending with ways to energize, and ultimately replace, a brokerage force whose average age is in the mid-50s, according to consultants.

Firms also are looking to develop branch-housed advisors comfortable with digital tools and prepackaged investment products that appeal to younger clients who start largely as DIY investors.

Merrill and its wirehouse rivals have exacerbated the problem of developing a next-generation of investors by raising the wealth parameters of clients serviced by experienced advisors. Merrill, for example, does not pay brokers on accounts with less than $250,000.

A Merrill spokesman said that the firm already has 27 financial solutions advisors in brokerage offices as part of a pilot program and aims to expand to 300 by the end of the year.

Merrill Edge brokers receive a mix of salary and bonuses. Traditional brokers are compensated with a percentage of the fees and commissions they generate, a potentially more lucrative “eat-what-you-kill” formula.

Morgan Stanley, which has almost 16,000 brokers, has not gone as far as putting call-center brokers in wealth branches to develop a new generation of advisors and clients. However, it plans to double its “virtual advisor” representatives who work in call centers and are incentivized to identify up-and-coming customers who can be referred to full-service branches.

Wells Fargo Advisors predated Merrill’s new model by placing some salaried “financial relationship advisors” in its Private Client Group branches to work with smaller accounts.

As part of its grand plan to coordinate bank and wealth management services, Bank of America has been sending some Edge representatives to selected branches on certain days to help with the transfer of sub-$250,000 accounts and to offer additional Edge accounts to certain wealthier clients with DIY instincts and to their offspring.

Bank of America, which bought Merrill in the depths of the financial crisis in January 2009, also assigns banking specialists to Merrill branches to help advisors pitch loans, checking and savings products to their customers.