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Merrill Freezes Recruiting, Relaxes Performance Hurdle

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Merrill Lynch said its advisor headcount grew in the first quarter  to 17,646. That’s up 111 from a year ago and 188 from the prior quarter.

At the same time, the average 12-month fees and commissions per advisor were $1.14 million vs. $1.04 million in Q1’19 and $1.1 million in Q4’19.

But this type of growth appears unlikely for Q2’20, based on the impact of restricted recruiting, face-to-face meetings with clients and prospects due to the coronavirus and market-related issues.

Speaking with the media after parent firm Bank of America released earnings Wednesday morning, a senior Merrill Lynch executive — who spoke on condition of not being named — said some 700 of the unit’s advisor trainees have temporary assignments elsewhere in the bank (to work on small-business loans and other projects) “and then [they] will be back on the path, in the medium term, to becoming advisors.” 

But the wealth unit’s work-from-home arrangements, “We’re not in a position to hire into [that] program … at the pace we’d had in the past,” the executive explained, mentioning that interviews and new offers can’t take place in the lockdown conditions. 

Offers to those set to start this month will “be honored,” but further hiring for it has been put on hold, the executive added.

Experienced Advisor Recruiting

There is still “some hiring” of advisors who already are licensed, have limited FA experience and received recent offers from Merrill. “We’ve had some individuals join us … from independent and regional firms,” the executive said, and they benefit from the three-year salary base in the Accelerated Growth Program. 

“Now, we are not extending new offers … as that’s not particularly practical” today, the executive explained. “We are not focused now on other types of competitive hiring, as we’ve talked about for a number of years.”

In other words, those individuals set to join Merrill teams and training programs in April are coming on board. Other new hiring, though, is on “pause.”

Performance Measures

As for its existing advisors, Merrill announced last month that it was “relaxing [some] performance expectations,” the executive said. And it’s revisiting such measures on a monthly basis “to reflect what is possible right now.”

“In an environment where no one can meet face to face with prospective clients that makes [it] more challenging” to add new accounts at the normal rate, he added. 

In March, Merrill Lynch pushed back its requirement that advisors have at least 30% of client households in three different financial programs to qualify for the enhanced team grid incentive program from July 1, 2020, to Jan. 1, 2021.

Broader Wealth Trends

“[As for] our wealth managers, we are continuing to add accounts in various businesses, [though] not at the rate that you would before,” BofA CEO Brian Moynihan said Wednesday during an analyst call, about Merrill Lynch and the Private Bank.

Still, “the wealth management contacts are up, [and] you are seeing even the referrals between our lines of businesses continue,” Moynihan explained. “It’s just at a lower rate, because of the necessities of the face-to-face meeting limitations, but those will come back as soon as we can get back in action.”

Referring to lower stock-market levels in March and what they mean for the wealth unit’s results, CFO Paul Donofrio commented: “Those impacts did not impact Q1 AUM fees, as March fees were calculated based upon market levels at the end of February.” Thus, volatility may dampen Q2 fees. 

“Revenue grew 2% year over year [in Q1'20], as a strong increase in AUM fees and brokerage fees were partially offset by a decline in net interest income as a result of lower interest rates,” Donofrio said.

The wealth unit’s revenue was $4.936 billion, up $116 million from a year ago and $23 million from Q4’19. The pre-tax margin, though, fell to 23% vs. 29% last year and 28% in the prior quarter.

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