Bank of America reported that quarterly profits for its wealth management unit fell 19% year-over-year due to falling transactional revenue and slightly higher expenses as the firm is building out its advisor force.

Profits for the bank's Global Wealth & Investment Management, which includes Merrill Lynch and U.S. Trust, fell to $656 million for the third quarter from $812 million for the same period a year ago.

GWIM's revenue dropped about 4% year-over-year to $4.5 billion. Non-interest expenses, meanwhile, inched up 1.2% to reach $3.4 billion.

The company said in a press release that the drop in revenue was also due in part to clients continuing to move from transactional brokerage relationships to managed relationships.


Merrill's revenue fell 4.6%, dropping to $3.7 billion from $3.9 billion. The wirehouse attributed this to a decrease in net-interest income due to persistently low-interest rates as well as rising market volatility.

Merrill's AUM also slipped for the quarter, shrinking to $1.9 trillion from $2.004 trillion for the year-ago period, a 3% drop.

The wirehouse's advisor ranks have been expanding, largely due to its training program. Merrill's headcount rose by 193 for the quarter to reach 14,563 advisors – making it the sixth consecutive quarter of advisor growth.

The trend stands in marked contrast to Merrill's wirehouse competitors, which have been slowly shrinking their advisor forces in recent quarters.

Merrill says it's committed to its long term training efforts in addition to selective recruiting, noting that it has hired 175 experienced advisors so far this year.

Over the summer, the wirehouse picked up several big teams from Barclays, which is set to sell its U.S. brokerage unit to Stifel Financial. For example, Merrill grabbed a Chicago-based team that oversaw $800 million in client assets while at Barclays. Advisors Jim Ertmann and Ben Foster generated $5.8 million in production before making the move to Merrill.

Some of these new hires have joined Merrill's elite Private Banking & Investment group, such as former Barclays advisors Peter Kong and John Shaw, who generated $6 million in production before joining Merrill. The two advisors joined Merrill's PBIG unit in San Francisco.

The wirehouse also says that advisor attrition is near historic lows for the firm, adding that even when advisors leave for other firms, Merrill retains 40% to 50% of that departing advisor's assets on average. Merrill says that when advisors join the firm, it brings over 80% of the newly recruited advisor's assets on average.

Amid its rising headcount, average advisor productivity fell to $1 million per advisor for the quarter from $1.077 million per advisor for the year-ago period.


U.S. Trust, the other business within Bank of America's wealth management unit, also reported that revenue fell, dropping to $756 million for the third quarter from $775 million for the year-ago period, a 1% decrease.

Like Merrill, U.S. Trust client balances also fell, slipping to $375 billion from $381 billion.

Company-wide, Bank of America's profits soared to $4.5 billion for the quarter from a loss of $232 million for the year-ago period, helped in part by falling legal costs.

Earnings-per-share rose to 39 cents.

"We saw solid results this quarter by continuing to execute our long-term strategy," CEO Brian Moynihan. "The key drivers of our business -- deposit taking and lending to both our consumer and corporate clients -- moved in the right direction this quarter and our trading results on behalf of clients remained fairly stable in challenging capital markets conditions. Our balanced approach to serving customers and clients is on track as the economy continues to move forward."

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