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July 17, 2019
ROSLAN RAHMAN / AFP / Getty Images
After two consecutive years of disruption in its compensation packages, Merrill Lynch does not expect significant changes in its 2020 networks or other compensation programs, said a senior executive Wednesday.
The decision reflects the satisfaction of the pace of growth of new households and new badets that the company's brokers have demonstrated since Merrill imposed a "growth grid" in 2018 that adds and subtracts payment points to reach or not predefined goals.
"These changes have achieved what we were hoping for and we have reactivated the engine of growth. At present, our pay changes are in the rear-view mirror, "said the executive under cover of anonymity.
His remarks come after Bank of America announced that its 14,700 brokers had generated a seasonal turnover of $ 4 billion in the last quarter and would add six new accounts, with an average of $ 1.4 million this year. year. "There is an alignment between revenue growth and advisor compensation," said the manager.
Merrill, which lost 71 advisors in the second quarter, is not paying brokers this year for the 3% of monthly income they generate, which is a gulf to reduce compensation costs that executives say surpbad income.
The scale seems to have been restored.
Merrill announced a record pre-tax profit margin of 26.4% on a 4% jump in revenues for the April-June period. The pre-tax margin of BofA's global wealth and investment division, which includes the more profitable but much smaller private bank, formerly known as US Trust, is 29%. The division's expenses increased 1% from the second quarter of last year, reaching $ 1.07 billion, while revenues increased 3% to $ 4.9 billion.
Despite the net increase of approximately 44,000 new broker-generated household accounts, the $ 5.3 million of new money injected into Merrill and private banking in the second quarter decreased by 49% from 10, $ 4 billion in the second quarter of 2018 and decreased by nearly $ 600 million in the first quarter of this year. The global wealth division closed the quarter with $ 2.9 trillion in client badets, up 5% from 12 months earlier, reflecting higher market valuations as well as the new currency. .
Merrill's management has stated that part of the decline in flows is due to the fact that new households tend to open brokerage accounts before moving to the fee-based consulting model, independently customer addiction for the exchanges. The company's Merrill One consulting platform remains "fundamental", generating 82% of revenues, he said.
(Wells Fargo said on Tuesday that total wealth management badets were stable in the second quarter, with net outflows offsetting higher market valuations, although its fee-based account badets increased 3% .)
Advisory accounts and net interest credited to wealth management firms by "large deposit and loan portfolios" that broker clients open with Bank of America have become the primary economic driver of Merrill's wealth management businesses said the executive, generating more than 82% of revenue. returned.
Merrill's veteran brokers have complained about the incentive in recent years for them to return wealthy clients to the bank for mortgages, other loans and deposit accounts. (Several years ago, Merrill penalized brokers who failed to make referrals, but he did not intend to reinstate the program, the executive said. .)
But BofA executives said that brokers and bankers benefited from synergy. Approximately 10% of new Merrill accounts opened in the second quarter came from referrals from other parts of Bank of America, mostly branch bankers and the Merrill Edge self-managed platform, while Merrill brokers had made 56 000 references to other parts of the bank. , they said.
Moreover, Merrill Lynch's executive said the bank was not planning to launch a business challenge at the service of registered investment advisers. Wells Fargo and Raymond James Financial Services, among other companies, have units to help RIAs manage and operate their independent consulting business, and several of Merrill's large producers have moved to become RIAs in recent years.
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