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Record Merrill Lynch growth as firm christens new crop of $1M, $5M advisors

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Merrill Lynch is not just hanging onto more of its advisors; brokers are also achieving record levels of growth and client acquisition, according to the company.

About 500 Merrill Lynch advisors reached $1 million or $5 million in production for the first time last year, a record number to have passed those benchmarks, the firm says.

That boost in production propelled the firm to notch its highest ever full-year revenue, reaching $15.9 billion for 2018, up from $15.3 billion for the year-ago period.

“The thundering herd is on the move,” says Andy Sieg, head of Merrill Lynch.

Advisor attrition was at its lowest level since the firm’s merger with Bank of America, according to the company, which reported earnings Wednesday. Though Merrill Lynch’s advisor ranks have expanded in recent quarters, total headcount dipped to 14,796 advisors for the fourth quarter from 14,838 due to seasonally low hiring, the company said. But the number of experienced brokers, i.e. those not in a training program, is up, according to the firm.

Sieg attributes better retention rates in part to advisors finding more value in the company’s platform and Bank of America capabilities, new rewards embedded in the compensation plan and cutbacks in recruiting efforts at Merrill’s chief wirehouse competitors.

“Generally, advisor movement in the industry is reduced and we are feeling the benefit of that as well,” Sieg says.

Like Merrill, competitors Morgan Stanley and UBS have previously recorded lower levels of advisor attrition. The two firms have yet to report fourth-quarter earnings.

Meanwhile, Merrill Lynch advisors, excluding those in the firm’s training programs, have been adding more clients, averaging 4.6 new relationships per advisor in 2018, up 63% from the prior year. The firm’s advisor productivity increased 5% year-over-year to reach $1.05 million.

That growth has been fueled partly by tweaks made to the firm’s compensation plan, which provided advisors new incentives to bring in more clients (and penalized those who didn't). The plan’s core components remain intact for 2019.

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It’s also helped boost the firm’s top-line growth. Fourth-quarter revenue rose to $4.1 billion from $3.8 billion for the year-ago period, according to the company.

Net income for Bank of America’s wealth management unit, which includes Merrill Lynch and U.S. Trust, rose to $1.1 billion from $744 million, a 43% increase driven by strong client activity and changes in tax law, according to the company.

However, market volatility in the fourth quarter hurt asset levels. Merrill Lynch’s client balances dropped to $2.2 trillion from $2.3 trillion from the prior year, according to the company.

Wells Fargo, which reported earnings on Tuesday, experienced a similar decline. Client assets for the bank’s retail brokerage arm sliding 10% to approximately $1.5 trillion. Wells Fargo’s advisory assets also dropped, falling 8% to $501 billion.

If asset levels continue to decline in the first quarter of 2019, that could impact fee-based income for the two banks’ wealth management units.

Morgan Stanley is the next wirehouse to report earnings, expected on Jan. 17.

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