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Merrill Says RIA Option Is a No-Go

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A Merrill Lynch branch office (Photo: AP)

Merrill Lynch says it will not be moving into an RIA channel anytime soon, unlike rival Wells Fargo and Goldman Sachs — which just wrapped up its purchase of United Capital

“We are not exploring any expansion into the RIA segment of the marketplace,” according to a senior Merrill Lynch executive, who spoke with the media after parent firm Bank of America released its earnings Tuesday.   

Its resource offering, which includes loans and trust services from across the company that clients access via their advisors “is powerful … and that is not a strategy that can be delivered on an independent platform,” said the executive, who asked not to be named. 

As for a move into a subscription model, as Charles Schwab did earlier this year, Bank of America’s global wealth unit is “continuously evaluating pricing strategies,” he explained, cautiously pointing out that 82% of its current revenue comes from fees on assets under management and net interest income tied to deposits and loans. 

On Tuesday, an executive in charge of digital capabilities for Merrill Edge — its DIY platform — said at an industry event hosted by SourceMedia that such a model is “a logical next step.” That statement came about six weeks after Bank of America gave clients the option of adding a human advisor to their robo accounts via Merrill Guided Investing, which has a $20,000 minimum and an annual fee of 0.85%.

Financial Results 

The global wealth unit, which includes Merrill Lynch and Bank of America Private Bank, grew its revenue 4% year over year to about $4.9 billion in the second quarter of 2019, while net income jumped 10.5% to over $1.07 billion.

Its parent company beat estimates with an 8% year-over-year jump in profits to $7.35 billion in the second quarter. Earnings per share rose 13% to $0.74 per share, but revenue grew just 2% to $23.08 billion.

But the Merrill headcount, now at 14,690, is down 130 from a year ago and 71 from the prior quarter. 

Total client balances for the broader global wealth unit are $2.9 trillion vs. $2.75 trillion a year ago. When Merrill Edge assets are included, the total asset figure stands at $3.1 trillion, according to the executive. 

Asset flows for the quarter in the global wealth business were $5.3 billion, which is down about 50% from last year’s $10.4 billion. 

The average level of yearly fees and commissions per Merrill Lynch FA, though, grew to $1.08 million from $1.02 million in the year-ago period. 

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