Merrill Lynch Boosts Client Minimum, Earns Expert’s Kudos

The move to raise the minimum household asset level to $250,000 comes as the wealth-management unit of BofA seeks further ways of increasing profits for its HNW operations

BofA headquarters in Charlotte, N.C. (Photo: AP) BofA headquarters in Charlotte, N.C. (Photo: AP)

Merrill Lynch is raising its minimum asset level for client households to $250,000 from $100,000 in 2012, the Bank of America (BAC) unit said late Thursday. The move, experts suggest, appears to be one more way for the unit to boost results of its high-end wealth-management business while carving out an expanding market for its mass-affluent Merrill Edge operations.

Merrill Lynch will not change payouts tied to existing household relationships of under $250,000 but will now pay out 20% on new accounts in this category. Plus, if an advisor has more than 20% of his or her book tied to relationships in which the household has assets of under $250,000, there will be no payouts for new household clients with asset levels of this size.

"Moving said minimum from $100,000 to $250,000 sends a loud message of what the firm values," said Chip Roame, head of Tiburon Strategic Advisors, in an interview with AdvisorOne. "And it makes being an FA more challenging."

On the one hand, "Merrill Lynch is back filling service for these smaller accounts with Merrill Edge, so the firm will be able to capture all types of clients," explained the Northern California-based consultant. And on the other, "The firm will allow its FAs to still take on and service these smaller accounts to a limited degree when the FAs see the upside."

"A lower payout on smaller accounts is a well-founded business strategy," stressed Roame (left). "Similarly, a policy that no payment will be earned after a book is compromised of more than 20% of these small accounts is another solid business strategy; I like it, too."

According to BofA, accounts at this level represent less than 6% of total client assets at Merrill Lynch -- which were about $1.45 trillion in the third quarter of 2011 -- and account for roughly 4% of total sales in the broader wealth-management division -- which totaled $4.2 billion in Q3.

Nonetheless, these accounts most likely represent a sizeable number of the firm's total accounts, estimates Roame, whose firm has 300-plus industry clients, including BofA-Merrill and rival Wells Fargo (WF).

. "One issue I can imagine is [the impact on] new brokers. This [shift] makes it increasingly difficult to get launched as one often hits up friends and family, many of whom will not have $250,000."

For its part, Merrill insists the change makes sense for both its business results and its advisors.

“Each year, we review financial-advisor compensation and make strategic adjustments to ensure the plan is aligned with the interests of our clients, shareholders, and advisors, as well as to enhance our leadership position within the industry,” a spokesperson explained in a statement. “We continue to make significant investments in tools and capabilities for our financial advisors, and more importantly, in their training and development to support their efforts to provide the best client service and expand their businesses.

Merrill Lynch includes about 16,720 advisors, who work for both it high-net-worth and mass-affluent (Merrill Edge) operations, defined as those with between $50,000 and $250,000 in investable assets.

In mid-December, Bank of America said it planned to add 160 Merrill Edge Financial Solutions Advisors in the Southwest by the end of March 2012 and named several managers to help it grow the business in the market.

Earlier in 2011, BofA explained that it was on track to nearly double the number of FSAs serving mass-affluent clients in branches and call centers to more than 1,000 by the end of 2011. It also aims to have about 1,000 small-business bankers serving clients in bank branches by early 2012.

According to the bank, it now has more than 8 million mass-affluent (or “Preferred”) customers. Merrill Edge introduced a mobile application for the iPad, iPhone and BlackBerry earlier this year and close to 500 new no-transaction-fee mutual funds on its platform.

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