Bank of America beat estimates and reported adjusted fourth-quarter net income of $7.3 billion, or $0.70 per share, in the fourth quarter vs. $2.4 billion, or $0.20 per share. Revenue in the latest period was $22.7 billion.
The bank’s wealth business had a 43% year-over-year jump in profits to $1.1 billion. The unit’s pre-tax margin was 29% in Q4’18 vs. 26% in Q4’17. Revenue was roughly $5 billion, up from $4.7 billion a year ago.
For the full year, wealth revenue grew 4% from the prior year to $19.3 billion, while Merrill Lynch’s sales jumped 4% to roughly $16 billion in 2018.
“Record revenue in wealth management was driven by client acquisitions across Merrill Lynch and U.S. Trust and includes a record number of new clients and deepening relations with existing clients,” said Andy Sieg, president of Merrill Lynch Wealth Management, on a call with the press Wednesday.
“Seventy percent of experienced advisors had their best year ever in 2018,” he explained. “And we had a record number of $1 million and $5 million producers.” Sieg pointed to the firm’s 2018 Growth Grid for compensation as a key factor supporting these results.
The wealth unit added about 53,000 households as clients in 2018, which is roughly double its average results since being acquired by BofA; the average household brings $1.4 million in assets.
On a gross basis, new household additions by veteran Merrill Lynch reps rose 63% in 2018 from the prior year to roughly 4.6 new relationships per advisor.
Average fees and commissions were $1.36 million for experienced advisors in Q4’18, while total advisor productivity was $1.05 million.
Across the unit, client balances were $2.6 trillion as of Dec. 31. Flows of client balances were $56 billion in 2018 vs. $14 billion in 2017. “The lion’s share” of these flows come from rival financial institutions, Sieg says, via the transfer of clients.
There were assets-under-management outflows of $6 billion in Q4’18 tied to market volatility, including “some shift from AUM to deposits,” BofA says. The unit also had $17 billion of brokerage inflows in Q4’18, with average loan balances hitting $164 billion.
Roughly three out of four advisors opened at least one BofA account for clients last year, up from one out of two in the prior year. “Plus, one-third of advisors opened more than 10 accounts in 2018,” Sieg added.
According to the executive, the wealth unit’s attrition rate last year was 2.6%. With training and recruiting, it now has 17,518 advisors — up from 17,355 a year ago. Including Merrill Edge reps, it has nearly 19,460.
Merrill Lynch advisors number 14,796 as of Dec. 31, down slightly from 14,838 in Q3’18 and 14,817 a year ago.
“The Thundering Herd is on the move … and growing like never before,” said Sieg. “We will make increased investments in technology, the brand and the client experience we offer to support them.”
As for the Broker Protocol for recruiting, which restricts the legal maneuvers of its members and that rivals UBS and Morgan Stanley have left, “There is no change in our position,” the executive said about its current membership.
“We feel very comfortable and confident with our position in the marketplace, and our focus is on creating the most attractive platform and growth-oriented firm,” Sieg explained. “It’s a winning strategy.”
He adds that its training program has had “a bit of a downtick” in its size, but remains “the biggest in the industry.”
As for the potential of offering a new affiliation route, as Wells Fargo says it may do, “We have no intention to move in the direction of independent advisory channel,” Sieg said.
“Our focus is squarely on trying to deliver what we think is a very unique, comprehensive relationship with our clients and think it’s best done via integration with our existing model,” he explained. “The Merrill advisor really is at sweet spot in our company [with] the capabilities in investing, banking, lending, etc. And that cannot be effectively delivered in our view with an RIA model.”