Merrill Lynch President and COO Greg Fleming has made quite a bullish case for the company’s global wealth management operations. In a presentation during the Credit Suisse 2008 Financial Services Forum, he shared the strategic advantages of the franchise, addressed it’s ’08 growth focus and emphasized Merrill’s liquidity, enhanced capital position and “strengthened management team.”
Total client assets under management for Merrill’s wealth-management operations stands at $1.75 trillion, up from $1.46 trillion in 2005 and $1.62 trillion in 2006, the company says. This makes Merrill the industry leader in wealth management, Fleming says.
Some 75 percent of client assets is tied to advisor-client relationships involving $1 million and up of AUM. And average yearly sales per advisor stands at $860,000.
From 2005 to 2007, the unit’s sales expanded at a 16 percent compound annual growth rate, from $10.5 billion in ’05 to $14 billion in ’07. Pre-tax earnings increased at a 33 percent clip during the same period from $2.1 billion to $3.6 billion.
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In 2007, about 49 percent of global wealth management sales came from fees, 33 percent from transactions, originations, etc., and 18 percent from net interest. In global private client, however, 67 percent of revenues were recurring.
Merrill’s global private client business and its global investment management operations account for 38 percent and 3 percent of its company-wide net sales, respectively. Investment banking stands at 14 percent, equity markets 24 percent and other operations (excluding sub-prime and collateralized debt obligations, or CDOs) 21 percent.
In 2007, the company had net write-downs of $20 billion related to CDOs and sub-prime mortgages in the second half of the year, losses of $600 million in the first half and adjustments of -$2.6 billion related to CDO hedges — or a combined loss of $23.2 billion.