BofA Wealth Profits Jump 10%: Q3 Earnings

The unit is set to have a new leader in 2017, when it will no longer offer commission-based retirement accounts

A Merrill Lynch office in New York (Photo: AP) A Merrill Lynch office in New York (Photo: AP)

Bank of America-Merrill Lynch (BAC) said its net income grew 7% to $4.45 billion, or $0.41 per share, in the third quarter ended Sept. 30 vs. $4.17 billion, or $0.38 per share, a year ago, beating estimates.

Revenue grew 3% year over year to $21.6 billion.

The Global Wealth & Investment Management unit reported net income of $697 million, up 10% compared to the third quarter of 2015. Revenue, though, was down about 2% from last year to $4.4 billion. The group’s pre-tax margin hit 25% vs 26% in the prior quarter, though it is up from the year-ago level.

Last week, John Thiel said he planned to step down from his post as head of Merrill Lynch Wealth Management at year-end. Andy Sieg, now head of the Global Wealth and Retirement Solutions for BofA-Merrill, will replace him on Jan. 1. (Thiel has led Merrill Lynch since April 2011 and plans to serve as vice chairman of the unit next year.)

Thundering Herd

The total number of wealth advisors is 16,069, up 158 from the prior quarter, excluding those in the mass-affluent Merrill Edge program, while the number of FAs is 14,552.

Average annual advisor productivity (or fees & commissions) stands at $983,000 vs. $1,007,000 as of Sept. 30, 2015.

While the unit’s asset management fees of nearly $2.1 billion were up 1% compared to the prior quarter they were down 1% year over year.

(Related: DOL Fiduciary Rule Forces Merrill to Drop Commission IRAs)

Asset flows for the most-recent period were $10.2 billion, up slightly from Q2’16 ($10.1 billion) and more than double the level of Q3’15 ($4.45 billion).

Average loan balances stand at $143 billion, up about 7% from last year and 1% from the earlier quarter. Total assets stand at $2.5 trillion.

“Referrals to and from GWIM business lines to other areas of the company have increased 11% year to date in 2016 compared to the first three quarters of last year,” the company said in a statement.

Fee-Base Plans

Merrill Lynch recently said that it abandoning commission-based retirement accounts in response to the coming Department of Labor fiduciary rules, which go into place in April 2017.

“We believe that the journey we’re on is the right one for our clients,” the business unit said in a statement. “For most Merrill Lynch clients, the best way for us to deliver retirement-related investment advice that meets the fiduciary standard is through our Investment Advisory Program. We will provide pricing flexibility to help clients transition from brokerage retirement accounts to our fee-based platform.” 

Retirement clients also can work with the Merrill Edge self-directed brokerage platform or, starting next year, with the Merrill Edge Guided Investing offering, it added. 

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