Merrill's Evaporation

A few years ago Merrill's overall brand became subordinated to that of Bank of America. "Merrill, a Bank of America Company" became the new face of things. BAC continues its obfuscation?and blurring away of its wealth management advisor function through a death by a thousand cuts. As we have noted over the last few years; Merrill's training program was replaced by the identical training program?used to train Edge advisors on the bank side?(https://www.dhirubhai.net/pulse/bank-americas-indoctrination-camp-bruce-papps-cfa/).

Not long after this it was reported that Merrill Edge advisors were issued marching orders and were sent into wealth management branches to mine the books of the wealth advisors for smaller accounts and children of clients belonging to the wealth advisors?(https://www.dhirubhai.net/pulse/invasion-book-snatchers-bruce-papps-cfa/).??

Now we have Merrill obscuring how advisors are counted.

The blurring of branding, function, and now headcount all go a long way, especially when looked at as a pattern, to truly revealing where Bank of America is looking into the future.?

Merrill for the first time, recently reported a single combined headcount of 20,000. This new count combines the core Merrill brokerage force along with the Merrill Edge advisors and the salaried advisors at Bank of America.?

Merrill's brokerage force had been precipitously dropping for many quarters, falling to an official count of 14,600 core advisors before it began?combining its Merrill Edge consumer brokers but kept its private bankers numbers separate.?

Merrill has all but stopped recruiting experienced advisors in the deal market in the last few years while claiming their attrition rate is only about 4%. But that equates to almost 20% in the last five years and now with no active recruitment occurring this is becoming a meaningful dent in their advisor ranks. With Merrill's losses involving the above average producing advisor it becomes easy to see that a major chunk of almost 25% of production has gone out the door in the last few years.?

The little recruiting that Merrill has been doing recently in the deal market has basically involved hiring second career individuals into a three to five year salaried position at about $200,000 per year. In other words, they are de-emphasizing commissions and promoting salary and bonus on all those new to Merrill.?

Any difference between how the bank advisor and wealth advisor is trained at Merrill is gone now that advisors are trained in the same program as are edge reps. Furthermore, these bank trained reps from Edge were recently sent into the branches of wealth advisors to assay those Merrill advisors books to see if children can be cultivated. This pilot program was so successful it is planned for expansion.

Could the writing on the wall be any clearer as to the direction of things to come? Merrill is not recruiting in the deal market and only sources new advisors by training second career hires who are salaried and trained by the bank side.?

Jerome Lombard, president of Janney Montgomery Scott, said that Merrill adding salaried FA's to Merrill wealth branches is "really putting it in the face of the FA's." With the Ultra High Net Worth segment of wealth management growing by an explosive 30%, it is a free for all scramble for that space going on between Mother BAC and the Merrill Wealth adviser.

John Pierce at Stifel said that "Recruits are telling us they feel there is an intentional disintermediation of their roles by putting clients into other channels of the bank. This makes advisers less important to their mass-affluent clients. New advisors working on an alternative pay scale only adds to that."

The sentiment at Merrill these days is that many are waking up to the smell of this coffee as well as becoming increasingly concerned about the gotcha posture of compliance. Many of the more seasoned advisors at Merrill are becoming increasingly worried that the firm will make something up based on an honest mistake about an expense and get fired. True story; one FA posted on Facebook negatively about BLM and his firm terminated him. These risks are real and increasing as the transformation into a bureaucratic?bank behemoth continues.?

Moreover, Merrill is going all out full force in developing a program designed to upgrade the skills of its 6,500 client sales associates. Merrill commented that the program is likely to motivate a growing number of them?to shift to becoming full fledged advisors. Give an "A" to BAC for subterfuge; these sales assistants are very close with the clients.?Anyone who can't see the subversive nature of this act is willfully blind.

Merrill is also working more closely with salaried?Merrill Edge brokers called "financial?solutions advisors" and expects to house 2,000 of them in Merrill brokerage offices over the next few years?(https://www.advisorhub.com/more-edge-advisors-heading-into-merrill-wealth-branches/).

With bank advisors coming into?your office to mine your book for clients and sales assistants being transformed en masse into FAs that know your clients extremely well, one can clearly see that Merrill has an agenda that is not in alignment with that of the advisor.?

In my days as a Financial Advisor at Merrill, there was great pride taken in the?role of being an advisor and enormous satisfaction in knowing that this role was respected within the organization. These current shifts in focus away from the traditional advisor towards the bank rep speaks volumes about the direction of Merrill and of things to come.??

To read similar articles, please view them at:?https://www.dhirubhai.net/in/brucepapps/detail/recent-activity/posts/

Having spent some twenty something years as an advisor myself, many of them with Merrill, I understand the cognitive dissonance these changes can cause the most balanced of individuals. Combined with the seemingly countless path opportunities available to today's advisor and its little wonder clarity as to direction can become blurred.

As a professional certified executive and business coach, my goal is to bring my twenty years as an advisor with another fifteen as owner of a recruiting firm to a complementary session as to what you truly want and the various paths open to getting it.

Please call (917) 334-8635 or email:?[email protected]

Please read the article below on this most recent fundamental?change in how the rank and file at Merrill and the other wires is counted.

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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.

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Wirehouses: Just Say No to Disclosing Broker Headcounts

by Miriam Rozen

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In a sign of shifting wirehouse priorities, two of the largest, Merrill Lynch and Morgan Stanley Wealth Management, last week made it harder to track exactly how many advisors work in their full-service brokerage units each quarter.

In a testament to its drive to integrate its bank and brokerage businesses, Merrill’s parent Bank of America for the first time reported, along with its first quarter earnings, a single combined headcount of almost 20,000 advisors across its wealth management businesses. The new tally included the core Merrill brokerage force, along with mass affluent brokers at Merrill Edge and salaried advisors at Bank of America Private Bank. In its previous reporting, BofA had separated the core and Edge brokers from the private bankers.

Morgan Stanley went a step further and eliminated entirely the broker count at its wealth management business, which a spokeswoman would only quantify as “around 16,000,” including its core advisor-led force and several hundred call center brokers it acquired with E*Trade Financial.

The changes highlight firms’ shifting business models, which have moved away from commission and investment sales in favor of growing fee-based assets, cross-selling customers on banking relationships and metrics that are less dependent on simply filling seats, according to Michael Wong, Morningstar Research Services’ director of equity research.

“The size of the broker salesforce used to be a key indicator of the health of the business and capacity to generate more commissions,” Wong wrote in an email following up a phone interview on the topic. “In the era of selling customers on more than just commissionable trades, firms are hoping to focus shareholders on net new assets, new accounts, fee-based assets, loans to wealth management clients, and other metrics.”

In discussing first quarter reports last week, both Merrill and Morgan Stanley executives de-emphasized the importance of individual broker counts to their overall enterprises.

“We think about our wealth management business across this full continuum of offerings,” a senior Merrill Lynch executive said of the blended headcount figure. “And we increasingly see our advisor talent moving across the continuum.”

At Morgan Stanley, the change comes as it expands beyond its core brokerage roots into areas such as self-directed brokerage and corporate stock plan services with its fourth quarter E*Trade acquisition.

“Once upon a time, when we had just the core business, that number of financial advisors and productivity per financial advisor were basically the only two metrics you needed to follow. And now we’ve got like 30 different things that are bobbing along,” Morgan Stanley Chief Executive James Gorman?told analysts?in a call on first quarter earnings. The emphasis on the larger metric pool reflects “a very different view of the wealth management business,” that his bank has adopted, Gorman said.

Wirehouses, to be sure, have been de-emphasizing headcount in recent years, as they have been contending with an increase in veteran broker retirements, attrition to independent or registered investment advisory channels, and challenges in graduating the next generation of trainees.

Merrill’s sales force had been declining for several quarters before it took the initial step in 2019 of?combining its roughly 14,600 core?brokers with 2,600 Merrill Edge consumer brokers–while still reporting private bankers separately.

“The inexorable trend is that the number of advisors in the industry is decreasing,” said Danny Sarch, a brokerage industry recruiter based in White Plains, New York.

Bill Willis, an industry recruiter in Palos Verdes Estates, California, said he suspects wirehouses have stopped the precise reporting exact headcounts because their executives are “tired of competing this way,” particularly as firms have become “murkier” about what’s actually included in the numbers or whether they’ve added advisors from other channels to bolster their reported rosters.

The other two wirehouses, Wells Fargo Advisors and UBS Wealth Management USA, have also made changes in recent years that make it harder to track headcount changes as their advisor forces have shrunk.

Wells Fargo, which had lost over 2,000 brokers net since its parent company’s fake account scandal in 2016, has for the past two quarters?reported?an advisor tally of around 13,500 brokers that includes around 900 “financial and wealth advisors” who had been overseen by the consumer bank but were merged into the core private client group in the fourth quarter.

UBS for the past several years has reported only an ‘Americas’ headcount figure of around 6,000 brokers, including several hundred in Latin America and Canada. UBS had previously seen years of sequential declines that brought the tally down from around 8,000 brokers a decade ago, although executives have said that the declines are in part by design as it focuses on a smaller number of advisors with higher average productivity.

Still, Morningstar’s Wong said that the push deprives shareholders of some key transparency.

“Is it less meaningful than it used to be? Sure. Is it something that I would like to know? Yes,” Wong said.

Advisor headcounts continue to help “signal changes in market share,” Wong said, “and the wirehouses have been on the losing end of the market share shift for the past decade or more.”

If Bank of America or Morgan Stanley are significantly increasing self-directed platforms and adding less than full-service FAs, who are paid less, Wong said, “it could change their operating margins.”