August 30, 2010

Wirehouse Watch: Why Merrill Lynch's Results Top Morgan Stanley's

Profits and margins at BofA-Merrill are well ahead of those at Morgan Stanley Smith Barney, despite MSSB's larger advisor force.

The battle between the two largest wirehouses -- Bank of America-Merrill Lynch and Morgan Stanley Smith Barney -- is being won in many respects by Merrill, according to industry statistics and experts interviewed by Bloomberg News.

Despite the fact that it has nearly 3,000 less financial advisors, Merrill Lynch is making more profits than Morgan Stanley, which operates an wealth-management joint venture with Citigroup's Smith Barney.

Bought by BofA in 2009, Merrill Lynch made $315 million more net income from its brokerage operations in the first half of 2010 than Morgan Stanley, the Bloomberg news item notes. Plus, Merrill's pretax-profit margin of 16.7% in the period was more than double that of MSSB, which had a margin of 7.8% in the first six month of the year.

Experts say one reason for Merrill's continuing strength is that the broker-dealer traditionally has done well in banking, financial planning and insurance - not just equities. Merrill is headed by Sallie Krawcheck, formerly of Citi Smith Barney.

Led by James Gorman, Morgan Stanley had 18,087 advisors and $1.5 trillion in client assets at the end of the second quarter vs. Merrill's 15,142 advisors and $1.4 trillion in assets.

MSSB recently picked up a team from Wells Fargo Advisors in Boca Raton, Fla., with yearly fees and commission of $1.2 million and $107 million in client assets.

However, it also lost nine financial advisors this month to Baird in Charleston, S.C., and Fort Worth, Texas, with about $1.3 billion in total client assets.

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