Merrill's One Platform Gains Steam Amid Profit Drop

  By Michael Wursthorn 
 

While profit from wealth management slipped in the first quarter, Bank of America Corp.'s (BAC) Merrill Lynch made progress in the push to get its brokers to move client assets onto a new advisory platform and increase fee-based business.

The brokerage firm, led by John Thiel, said on Wednesday that 51% of its more than 14,000 advisers have half their client assets on Merrill Lynch One, which is meant to replace five aging platforms, each with its own fee schedule, enrollment process and website, before the end of the year.

So far the firm has $325 billion in assets on the platform, $242 billion being converted assets already managed by the firm, while $82 billion represented net new flows. That is more than double the $157 billion that resided on the platform in October.

That work contributed to an 11.4% jump in asset-management fees to $1.65 billion in the first quarter from a year earlier, which helped compensate for the lower transactional revenue in the bank's global wealth unit that Merrill is housed in. Long-term asset flows, which include fee-based relationships, grew by $4.1 billion from the previous quarter to $13.5 billion. Merrill now oversees $2.04 trillion in client assets.

For some time now, the brokerage industry has put more emphasis on accumulating fee-based assets since the revenue generated is steadier and more predictable compared to transactional fees, which tend to be seasonal and less predictive.

But in Merrill's case, the conversion to Merrill Lynch One also means some clients, including those with accounts on one of the most popular older platforms, will be charged a higher fee, The Wall Street Journal previously reported.

Merrill's headcount increased to 14,183 advisers, 98 more than the fourth quarter of last year. A number of those new additions are from Merrill's adviser training program, which graduated 146 in the first quarter.

But average adviser productivity across the firm fell to $1.04 million from $1.07 million in the fourth quarter. Bank of America Chief Executive Brian Moynihan said the drop was due to reinvestment in the brokerage.

"The productivity per adviser in our business is extremely strong and...[has] structurally been strong for many years and continues to increase," Mr. Moynihan said in a conference call with analysts on Wednesday. "You wouldn't mind diluting that to get faster long-term growth prospects for the business and broaden out the business, and that's what John and the team are doing."

The segment Merrill is housed in under the bank's global wealth and investment management unit reported $651 million in net income, down 11% from a year ago due to lower interest rates and transactional and mutual fund volumes, and higher compensation costs. Its pretax margin, a key performance indicator, fell two percentage points to 23%.

But Bank of America also reported that its global-wealth unit saw loan balances grow to $131 billion, up 10% from the year-earlier period. Also, greater collaboration across the organization led to the attraction of 472 funded institutional retirement plans in the first quarter and $2.7 billion in assets, which is 139 more plans than the first quarter a year earlier.

On the call, Mr. Moynihan said that "interaction" between wealth management and Bank of America's other channels is a competitive advantage over its rivals and will play a key role in further growth.

Write to Michael Wursthorn at [e-mail]

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