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January 05, 2012 at 12:46 PM
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).
