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Best year of their careers? Merrill advisors are notching record growth

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Merrill Lynch’s herd is thundering into record territory, spurred on by growth incentives that executives are likely to keep in place.

Advisors at the firm notched up record year-to-date net new households: 29,195, according to Bank of America, which issued its third quarter earnings report Wednesday morning. That figure is up 24% year-over-year.

The firm also reported record year-to-date client flows of $26 billion, up 19%.

There’s more good news for the firm, according to a Merrill executive who asked not to be named in order to discuss the matter. A convincing majority of Merrill’s advisors — 70% — have achieved higher production levels year-to-date than compared to 2018, and 60% of advisors are on track to have the best year of their career.

“Those are strong numbers for us and ahead of last year,” says the executive.

Merrill attributes compensation changes in recent years and greater connectivity between Merrill and other Bank of America business lines with helping to drive growth. In its 2018 compensation plan, Merrill Lynch added incentives for advisors to pursue client acquisition, while imposing penalties for those who lagged behind growth targets. The firm’s growth grid is unlikely to change in 2020, according to the executive.

Merrill Lynch’s revenue hit a record $4.1 billion, up 3% year-over-year, surpassing the previous high set in the fourth quarter of 2018. Merrill credited higher net interest income and positive AUM flows.

Advisor productivity is also up, rising to $1.096 million per FA from $1.035 million. The firm says experienced advisors, which it defines as those not in the training program, are on track to score 5.5 new relationships per FA for the year.

Client balances for Bank of America’s wealth management business, which also includes Merrill Edge and the private bank, rose to $2.9 trillion from $2.8 trillion, a 2% increase.

Wells Fargo, which has suffered advisor attrition over the past three years, reported client assets declined 1% to approximately $1.9 trillion, according to the bank’s earnings report issued earlier this week. Morgan Stanley will report its earnings later this week.

Bank of America has strived to build greater connectivity between its wealth management unit and its other businesses. While the bank has made progress, it still has room to grow. Just over half of Merrill clients use the bank’s deposit and lending capabilities, according to the company.

In the meantime, Merrill Lynch is attracting new business from other parts of the bank: 13% of new client relationships originated from referrals in another part of Bank of America, according to the executive.

The firm is also investing heavily in digital capabilities. Earlier this year, the firm added a human-plus-digital option to its wealth management offerings, which already included a DYI platform and a robo advisor.

Bank of America CEO Brian Moynihan said the firm is working to leverage digital advancements to enable advisors to be more efficient and handle more clients.

“There’s a lot of paper still in this business because of the history. It’s a very digital business when you think about how, say, trades go through, but it’s still a paper business in other ways,” Moynihan said during the Wednesday earnings call.

Responding to an analyst’s question regarding discount brokerages move to offer no-commission ETFs, Moynihan noted the firm already offers free online stock and ETF trades for its Merrill Edge customers, who are members of its preferred rewards program.

He also emphasized the firm’s strategy aims to treat client needs holistically.

“We are driving a whole relationship,” Moynihan said.

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