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BofA Reports 47% Jump in Merrill, Private Bank Profits: Q4 Earnings

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What You Need to Know

  • BofA's wealth management unit ended Q4 with 18,846 advisors, down just a few from Q3.
  • About 1,000 trainees have entered its new advisor development program since it launched in June.
  • Digital usage remains strong among clients.

Bank of America profits rose 28% from last year to $7 billion, or $0.82 a share, on a 10% jump in revenue to $22.1 billion in the fourth quarter ended Dec. 31, it said Wednesday.

The latest financial results benefited from revenues growing faster than expected, according to the company.

The bank’s global wealth and investment management division, which includes Merrill and BofA Private Bank, had a 16% year-over-year increase in revenue, growing to $5.4 billion. Its net income jumped 47% to $1.2 billion.

Total client balances were $3.8 trillion, up 15%, “driven by higher market valuations and record client flows,” the company said in its earnings news release.

Total client flows across the wealth unit reached a record $171 billion in 2021, “more than a threefold increase” from 2020, a senior Merrill executive told reporters on a phone briefing Wednesday morning.

“We attribute this significant increase in flows to two things,” he said. “First, the success of our organic growth strategy through which we’re attracting new clients and deepening relationships with existing clients.”

And, second, the growth strategy was in place during a period of “tremendous wealth creation in the U.S.,” he said.

Total Merrill client balances were $3.2 trillion, up 14%, with assets under management representing $1.3 trillion, up 17%. It added about 6,700 net new households in Q4, up 32%, and more than 23,000 in 2021, up 6% from 2020, the company said.

Total Private Bank client balances were $625 billion (up 16%), with AUM of $360 billion (up 15%). The division added about 500 net new relationships in Q4, up 30%, and about 1,900 net new relationships in 2021, up 7% from 2020, the company said. It also added about 2,500 new individual clients to existing relationships, reflecting about a 10% increase in multi-generational accounts.

Flat Advisor Headcount Again

The firm’s wealth management unit had a total of 18,846 advisors as of Dec. 31, including Merrill, BofA Private Bank and some Consumer Investments professionals.

Advisor headcount was about flat from the third quarter that ended Sept. 30, when it reported having 18,855 advisors, and was down 6% from a year ago.

That was due largely to the wirehouse’s 18-month pause in hiring trainees during the pandemic, and as the company prepared to launch its new advisor development program that was announced in June, the senior Merrill executive said.

Historically, Merrill had hired about 2,000 advisors into its training program annually, the company noted.

The new advisor development program was launched in June. Since then, 1,000 trainees have entered and hiring continues, the company said.

The program “will scale in the course of this year” and, “quarter by quarter, you’ll see the ranks of this program increase,” the senior executive said, adding the goal is to eventually have 1,000 trainees graduate each year.

One positive sign was that attrition among experienced Merrill advisors dropped in Q3 to below the firm’s historical average of 4% and decreased further in Q4 to 3.1%, the company said.

Merrill is seeing “many of our best advisors extending their careers” with the company, the senior executive told reporters. After all, he said: “A career as a financial advisor is one that is very conducive to extending well beyond age 65.”

We should continue to expect low single-digit growth in the firm’s advisor population annually over the next five years, driven by its hiring plan and the increased success rate of advisor trainees, the company added.

Digital Usage Still Growing

The company also again reported that digital usage continued to grow among its Merrill and Private Bank clients.

Seventy-nine percent of Merrill households were digitally active across the enterprise, the company said. There was continued growth of advisor/client digital communications as 397,000 households exchanged about 1.5 million secure messages.

Also, 230,000 Merrill forms were signed digitally in Q4, representing 47% of all eligible transactions, the company said.

In Private Bank, a record 85% of clients were digitally active across the enterprise, the company said. Clients are “increasingly leveraging the convenience and effectiveness of our digital capabilities,” with Erica interactions growing 418%, Zelle transactions up 45% and digital wallet transactions up 60%, the company said.

(Pictured: A Merrill Lynch branch office; Photo: AP)