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Wirehouses Post Mixed Results for Q4’11

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Bank of America said in mid-January that it had net income of $2 billion, or $0.15 per share, for the fourth quarter of 2011 vs. a net loss of $1.2 billion, or $0.16 per share in the same year-ago period, meeting analysts’ expectations. Revenue, net of interest expense, grew 11% to $25.1 billion on a fully taxable-equivalent basis.

As of Dec. 30, BofA employed 17,308 financial advisors, an increase of 214 from the previous quarter and 1,697 over the previous year. Much of the growth came from the hiring of Merrill Edge advisors, who serve client households with $250,000 or less in investable assets. The company says that its advisor force has grown for 10 consecutive quarters.

In terms of net new assets, the global wealth operations of BofA had inflows of $5.49 billion in the fourth quarter vs. inflows of $1.92 billion in the third quarter and outflows of $2.4 billion in the year-ago period, which included flows associated with the sale of Columbia Management (on May 1, 2010).

For the full year, net new assets totaled $15.68 billion vs. outflows of $27.63 billion in 2010. Average sales (or fees and commissions) per advisor were $873,000 in 2011, up from $850,000 in 2010, excluding Merrill Edge advisors. For the quarter, however, average production per rep totaled $819,000 — a drop from $854,000 in the previous quarter and $913,000 a year earlier.

The global-wealth operations had net income of $249 million, which dropped $98 million from the third quarter and $70 million from the year-ago period due to lower market-driven revenue and higher expenses, the company said.  

The unit also reported slightly reduced revenue for the quarter, both sequentially and for the year, which it blamed on lower investment and brokerage income “driven by suppressed 3Q11 market levels and lower transactional activity.” For the year, sales were $17.38 billion, a 7% jump from 2010.

Client account balances increased 3.5% during the quarter to $2.14 billion thanks to higher 4Q11 market levels and strong AUM flows, according to BofA. Assets held by Merrill Lynch clients totaled roughly $1.5 trillion, an increase of 3% from the third quarter and a drop of 1.3% from the same period of 2010.

Morgan Stanley

Morgan Stanley reported a loss from continuing operations of $227 million, or $0.14 per share, vs. net income of $871 million, or $0.44 per share, for the same period a year ago — topping analysts’ forecasts. The loss was tied to a $1.7 billion legal settlement and issues related to MBIA and credit-default swaps.

The company, led by James Gorman, said its revenue for the period fell to $5.7 billion from $9.9 billion in the previous quarter and $7.7 billion a year ago. Much of the decline was reported by the institutional-securities unit.

Its wealth-management unit saw its flows of net new assets drop about 60% from both the third quarter and the year-ago period to $6 billion. Flows in fee-based asset accounts were down 51% sequentially and 61% year over year to $4.9 billion.

Morgan Stanley, which says it moved to streamline the job descriptions of advisors and staff at its legacy Morgan Stanley and Smith Barney channels, had a pre-adjusted total of 17,156 financial advisors as of Dec. 30 — and 17,649 advisors after accounting for the adjustment.  

Overall, its advisor force shrunk about 1% for the quarter (or by some 140 FAs) and declined roughly 5% for the full year (a drop of about 800 FAs). Morgan Stanley has instituted a series of job cuts in the past few years, which included the firing of low-producing reps.

The average yearly sales (or fees and commissions) per advisor were about $745,000 as of Dec. 30, a 1% increase from the earlier quarter and year-ago period.

Total assets in the wealth-management unit were $1.65 billion, a 5% jump for the quarter and 1% drop from the fourth quarter of 2010. Per advisor, assets under management are about $95 million, a slight increase from the earlier and year-ago periods.

“In 2011, Morgan Stanley’s wealth-management unit had global fee-based asset flows of $42.5 billion and net new assets of $35.8 billion, the highest for both since the inception of the Morgan Stanley Smith Barney joint venture,” the company said in a press release. “The year’s pre-tax margin improved to 10% from 9% a year ago,” it added.

In early 2011,Citi said its latest results included $43 million from brokerage and asset management sales, down from $136 million a year ago, largely reflecting a decline in the equity contribution from the Morgan Stanley Smith Barney joint venture.


UBS said that its fourth-quarter net income fell to 393 million Swiss francs from 1.66 billion Swiss francs in the 2010 period, missing forecasts. Wealth Management Americas’ pre-tax profit was 114 million Swiss francs (or $125 million) compared with a loss of 32 million Swiss francs last year and a gain of 139 million Swiss francs in the prior quarter.

In U.S. dollar terms, operating income for the Americas unit, led by former Merrill Lynch executive Bob McCann fell 5% in the fourth quarter due partly to lower fees and commissions. Net new money was 1.9 billion Swiss francs (or $2.1 billion) compared with 3.4 billion Swiss francs last year and 4.0 billion Swiss francs in the previous quarter.

According to UBS, net recruiting of financial advisors drove net new money during the quarter. Including interest and dividend income, net new money was 7.9 billion Swiss francs (or $8.7 billion) vs. 8 billion Swiss francs in the prior quarter and 8.9 billion Swiss francs in the year-ago period.

Revenue in the quarter ended Dec. 30 was $1.46 billion, down 4% from last year but up 2% from the third quarter. For the fourth quarter, UBS says it had the highest revenue (or fees and commissions) per financial advisor in the industry at $842,000, as well as the highest invested assets per FA and net new money per rep.

Wealth Management Americas included 6,967 FAs at the end of the fourth quarter, up 171 from a year ago and 54 from the previous quarter, reflecting the hiring of experienced financial advisors, according to UBS.

In early February, UBS said it recruited six advisors from Bank of America-Merrill Lynch, Morgan Stanley and Alliance Bernstein. The Eubanks Lappin Group joined UBS in Raleigh, N.C., from Merrill with roughly $4 million in production and $750 million in assets under management. Also coming over from BoA-Merrill is the Trudeau Group in Birmingham, Mich.

Joining UBS in New York is David Shorr, a former Morgan Stanley Smith Barney advisor with about $2.8 million in trailing-12-month fees and commissions and assets of $355 million, and Steve Owen comes to UBS in Dallas from Bernstein.

Wells Fargo

Wells Fargo Advisors said it had client assets of $1.1 trillion as of Dec. 30, unchanged from Q3; it also had 15,263 financial advisors, up 75 from three months ago. Close to 11,120 of these reps are in the traditional brokerage channel, representing a jump of 39 from the previous quarter.

WFA is part of the wealth, brokerage and retirement unit, which had net income of $325 million in Q4 vs. $291 million in Q3 and $197 million in the year-ago period.

Wells Fargo said in late January that it hired seven advisors this month from UBS and Morgan Stanley Smith Barney with close to $730 million in total assets and $5.8 million in yearly fees and commissions. One UBS advisor moved to FiNet, an independent channel of Wells Fargo with about 1,050 FA; FiNet, which added 152 financial advisors last year, the company says.

Matthew Montini of San Jose, Calif., came over to FiNet from UBS. His practice, FIG Capital, has about $220 million in assets under management and some $1.1 million in trailing-12-month products (or fees and commissions).

Recently, Tiburon Strategic Advisors issued a report that speculated the wirehouse firms would move more aggressively into the independent channel, which only Wells is active in at present.

Also joining Wells this month from UBS are advisors Christopher Zich, Kenneth Fruehauf, Thomas Buhl and Keeland Howe. They are now part of the traditional employee-advisor channel at Wells Fargo in Grosse Pointe Woods, Mich., and Scottsdale, Ariz. The team’s combined AUM is $424 million, while its yearly sales are some $4 million.

Joining Wells in Port Richey, Fla. (near Tampa), from Morgan Stanley is the Cox Wilkins Group, which includes advisors Avery Wilkins and Michael Cox. The team, which will work with Wells Fargo as employee advisors, has total assets of $84 million and total yearly fees and commissions of $738,000. •


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