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Merrill Lynch will not offer a way for financial advisors to independently affiliate with the Wall Street giant, even as industry competitors are opening up that business model, Merrill’s wealth management head said Thursday.
Andy Sieg, the president of Merrill Lynch Wealth Management and a member of parent Bank of America’s executive management team, spoke about his plans for the next 10 years and the strategy behind his talent and technology decisions in a wide-ranging podcast with Diamond Consultants, a wealth management recruiting firm.
Mindy Diamond, the CEO and founder of Diamond Consultants, hosted the exchange on a podcast that explores how financial advisors move toward independence in their practices.
“Independence” refers to advisors who are contractors and own their own books of business, as opposed to following the conventional model of W-2 employees at a brokerage firm.
Merrill competitor Wells Fargo is one example of a wirehouse that has entered this space, through its FiNet channel for advisors who want another option beyond working in the firm’s traditional employee channel. Like other independent channels at fellow brokerages Raymond James and Ameriprise, FiNet has recruited advisors from employee firms like Merrill.
Speaking about Merrill’s goals, Sieg said that “my primary focus has been trying to get this business back onto a growth footing over the last six or seven years.” He added that strong investment in tech capabilities for advisors, along with talent development programs and compensation grids that emphasize growth, had paid off so far.
In the fourth quarter of 2022, Merrill advisors hauled in new clients whose average wealth, $1.7 million, was more than double that of a decade ago, Sieg said.
Looking ahead, Sieg said he was focused on delivering competitive support platforms at scale for advisors and building collaborative relationships among them.
“If I think about the most profound changes in the business over the last 30 years, the shift in this business from being a business of individual contributors to a business built around teams may stand out as the most visible monumental change,” he said.
While an increasing number of advisors want something different from what Merrill and other wirehouses offer, “the Merrill model is good enough for the vast majority of advisors,” Diamond said, speaking with Financial Planning afterward.
She acknowledged that in some ways, the wirehouses have to face attrition.
“With 15,000 advisors, it’s impossible to be all things to all people … That’s why there have been a lot of top advisors that voted with their feet” by going to competitors, “and many that will continue to.”
But it’s neither the pay nor the tech capacities that advisors give her as their top reason for going elsewhere.
“The most important factor is the ability to serve clients with more freedom and control,” Diamond said.
An independent channel could have been one such way to address that, but Merrill is choosing a different strategy.
Sieg said he felt that Merrill was obliged under regulatory requirements to supervise brokers in ways that some advisors bristled at, but that the benefit of institutional resources and networking with Merrill’s famous ‘thundering herd’ of peers outweighed that for most advisors.
“An advisor may leave based on, hey, they’re willing to take some of the risk to their own license and their own practice.”
Below are some more of FP’s takeaways from the conversation.
Recruiting more big players, prioritizing younger talent “We do feel like now we’re in position to respond in many cases to some of the incoming inquiries that we’ve had about whether we would offer some experienced advisor recruiting deals. We have an offer that I think is consistent with the market,” Sieg said.
He repeated his comments in the company’s recent earnings call and other public appearances that he had been focused on building out pipelines in the company for training newcomers, apprenticing new brokers to teams and hiring early-career advisors to build up more business with wealthier clients.
Sieg said he had seen peers invest heavily in recruiting top advisors, including some from his firm, but the upfront costs — in one case, what he said was over 400% of trailing 12-month revenue for a team that he recently lost in the Northeast — could be irresponsibly high, in the context of the company balance sheet.
“We see around us some deals that take place in the market which defy any rational economic analysis in terms of them being accretive to the acquiring firm,” Sieg said.
Regarding the team in question, “we’ve seen what the transition experience has been for their clients. And six months in, less than 50% of the clients have moved.”
Bulls moving to herds Asked if Merrill had plans to add independent channels, given that rivals like Wells Fargo had done so in recent years, Sieg gave a hard no.
“It’s something that we’ve looked at every couple years for 30 years. It has never made sense for us,” Sieg said. “That’s not only a topic that revolves around products and services and platforms and comp, it revolves around culture, the idea of one unified Merrill Lynch organization out in the world.”
Rather, he was more interested in helping the advisor force at Merrill go more in what he called the natural direction of the industry — teams. Currently, 80% of his financial advisors work in teams.
“When you look at people earlier in their career, those numbers are even higher.”
Although some advisors prefer to remain independent, the sense of community from working with teams at Merrill and networking with 800-1,000 peers and mentors in the firm’s Advisor Growth Network provide unique advantages to going it alone, Sieg said. In addition, having a team makes succession easier and retention of client assets, especially in the case of wealthy multigenerational families, a smoother process.
“Clients are becoming more and more outspoken as individual contributor advisors [are] getting to later stages of their careers,” Sieg said. “They hear from clients directly, ‘Hey, what’s going to happen on the day you retire, Mr. or Miss Advisor, who’s going to be there for my kids and for my grandkids?'”
By having a younger advisor on the team, the senior members can reassure matriarchs or patriarchs that they have what it takes to sustainably manage their wealth.
Growing closer to Mother BofA Far from seeing the wealth firm’s integration with its parent company Bank of America as a problem, as some do, Sieg finds it a source of pride and competitive advantage.
“Almost all advisors are involved in one form or another in a referral relationship with the broader Bank of America,” he said, adding that he intended for Merrill advisors to work “closer and closer” with the rest of the company over time.
Rather than seeing client referrals from the bank to wealth advisors as referrals per se, Sieg called that process “coordinated client coverage — not something that the word ‘referral’ kind of conjures up, which on a bad day can feel like tossing an opportunity over the fence to another side of the company.”
He pointed out that prior to being acquired by the bank in 2009, there were four or five advisors at Merrill who had north of $5 million of production credits. Now that’s upward of around $250 million.
While some advisors have complained they feel pressure to cross-sell banking products to clients, Sieg said demand for these one-stop banking services was often coming from clients themselves.
“Most clients, one of the things they are frustrated by in the world of consumer banking is, they aren’t receiving the kind of white glove service that you get from your wealth management organization.”
He said Merrill clients opened 150,000 to 200,000 new checking accounts in a year.
“We’re trying to make sure that this set of capabilities inside Merrill and the broader Bank of America, which is unmatched in our industry, is as accessible and as easy to put to work on behalf of clients as possible,” he said.
“Because for our advisors, that’s among the key differentiators for us as an organization, the ability to do just so much for clients.”