Merrill Lynch Gains Brokers -- at a Price

By Michael Wursthorn 

Bank of America Corp.'s Merrill Lynch broker headcount climbed by more than 100 at the end of 2016 from the year before, but average revenue generated per broker continued its recent downtrend.

Merrill has been putting more emphasis on boosting its broker headcount through the training new brokers instead of focusing on the costly practice of poaching experienced brokers from rivals. But those trainees are tasked with building their own client roster from scratch, and they don't immediately contribute revenue and assets to the firm, pulling down the average productivity of its brokers.

In the fourth quarter, average yearly productivity per broker fell to $964,000 from $996,000 a year earlier and $983,000 in the third quarter of 2016. According to the firm, annualized average productivity for experienced brokers -- excluding those in the firm's training program -- was $1.25 million per adviser in the first quarter, down from $1.3 million a year earlier.

The number of full-service brokers increased to 14,629 as of Dec. 31, up 129 from the same period in 2015. A spokesman attributed the broker gain to an influx of recruits from Merrill's training program, as well as recruitment from rivals and low attrition of experienced brokers. A Merrill spokesman declined to break out those metrics further.

Merrill has been increasing its broker headcount at a time when its brokerage rivals have been shrinking or flat. Wells Fargo & Co., which also reported fourth-quarter results Friday morning, said its adviser headcount shrunk by 1% to 14,882 from a year earlier. Morgan Stanley and UBS, which haven't reported fourth-quarter earnings yet, both saw quarter-over-quarter declines in broker headcount in the third quarter.

Merrill, like other firms, has been looking at alternatives to boost headcount, assets and revenue. Traditionally, brokerages relied on recruiting to boost metrics, but the practice has grown more costly in recent years as pay packages ballooned to entice brokers from one another. Those recruitment packages took a hit this past year as new regulations imposed on retirement accounts have forced changes to how they are structured. And UBS Group AG said in June it would spend less on recruiting brokers to better pay those who currently work for the firm.

Despite the focus on growing through its training program, Merrill has been recruiting. It announced the hiring of two brokers from Comerica Bank in December and another pair from J.P. Morgan Chase & Co. in October. In September, it hired three UBS brokers who managed about $750 million in assets altogether, as well as a Morgan Stanley broker who oversaw $240 million.

Bank of America's global wealth and investment unit said revenue fell 2.3% to $4.4 billion for the quarter as higher asset-management fees weren't able to offset lower commission revenue. Broadly, Bank of America reported its biggest annual profit in a decade, though revenue was lower than analysts expected.

Merrill Lynch contributed $3.6 billion to the unit in the fourth quarter, down 2.5% from a year ago.

Client balances at Merrill rose 6%, or $116 billion, to $2.1 trillion from a year earlier. The bank said the higher balance reflected strong net inflows.

The bank's wealth unit, which also includes private bank U.S. Trust, continued to increase the amount of loans taken out by customers. Average loan balances rose 7% from last year to $146 billion.

Write to Michael Wursthorn at [e-mail]

(END) Dow Jones Newswires

January 13, 2017 14:11 ET (19:11 GMT)

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