From the June 2007 issue of Research Magazine • Subscribe!

June 1, 2007

Merrill Nears 16,000 FAs; AUM Tops $1.6 Trillion

Merrill Lynch has reported its second-best results ever, says Richard X. Bove of Punk, Ziegel & Company in Lutz, Fla. The company continues to aggressively invest in both organic growth and acquisitions, and "this activity in congenial markets is resulting in superb results," Bove says.

According to Merrill, global private client (GPC) increased its net revenues year over year for the 10th consecutive quarter; and results for global investment management (GIM) are benefiting from earnings generated by the firm's investment in BlackRock. The private-client and investment-management segments comprise Merrill's global wealth management (GWM) business.

In the first quarter of 2007, this business had revenues of $3.4 billion, up 16 percent from the first quarter of 2006. Sales in private client increased 11 percent to $3.1 billion, including record fee-based revenues. The company says its investment in BlackRock is boosting results by allowing it to create alternative investment products for GPC clients.

Pretax earnings for GWM stood at $842 million, up 31 percent from the first quarter of 2006, and the pretax profit margin was 24.7 percent. Turnover among FAs, especially top-producing FAs, remains low, the company says, and the FA headcount reached 15,930 at quarter-end.

Client assets in products that generate annuitized revenues ended the quarter at $633 billion, and total client assets in GWM accounts were a record $1.6 trillion, up 10 percent.

In late January, Merrill announced plans to acquire First Republic Bank, a private banking and wealth-management firm focused on high-net-worth individuals and their businesses, for about $1.8 billion in cash and stock.

"Merrill now has approximately 16,000 financial advisors on its staff, or more than any other company in the business. They brought in an additional $16 billion in assets in the quarter," Bove explains. "The acquisition of First Republic Bank will further augment these numbers."

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Panel Asks Merrill to Reinstate Sumner

A three-person arbitration panel recently upheld a July 2004 decision that Merrill Lynch must give former broker Hydie Sumner a job as an advisor in the firm's San Antonio branch, where she worked from 1991 to 1997, and give her the chance to attend the firm's management-assessment program.

Sumner won a $2.2 million sexual-discrimination claim against the firm about three years ago, when she and some 900 claimants argued that Merrill discriminated against women in promotions. Recently, Merrill had offered her direct entry into management as associate director at the firm's East Bay complex in Oakland, Calif.

"Merrill's offer of a direct appointment to a managerial position did not comply with the reinstatement award," the panel says.

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Janet Levaux is the managing editor of Research; reach her at jlevaux@researchmag.com.

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