Merrill Lynch eyes affluent Florida, as wealth management buffers parent BofA’s disappointing quarter

Wealth management is a silver lining at Bank of America.

The Wall Street behemothreported earnings of $9.2 billion in the second quarter, up from $3.5 billion a year earlier. The huge increase was due in part to the bank’s release of more than $2 billion it stashed away in anticipation of covering soured loans from the COVID-19 pandemic. Still, total revenue disappointed analysts, falling to $21.5 billion, down 4% from $22.3 billion a year ago. Low interest rates dented interest income, and trading revenues fell.

The wealth management front was a different story. The nation’s No. 2 bank by assets showed strong growth in revenues, with record-level fees for assets under management (AUM) and client balances from April through June.

Big takeaways:

• Money is flooding in, thank to strong markets and new client assets: In the first half of 2021, a record $71 billion in new money came in through Global Wealth and Investment Management (comprising its core Merrill Lynch division, BofA’s Private Bank and Consumer Investments), exceeding 2019 and 2020 flows in half the time. The three units now have $4.1 trillion in client balances.
• Total AUM across the three units rose to $1.5 trillion in the second quarter of 2021, up 27% from a year ago.
• Asset management fees rose 27% to nearly $3.1 billion from nearly $2.5 billion a year ago. But compared to $3 billion in the first quarter of 2021, the most recent quarter’s growth was much smaller.
• Brokerage fees dipped to $967 million from just over $1 billion in the first quarter. They were $939 million a year ago.
• Advisor headcount dipped slightly, but the bank expects hiring to pick up in the second half of 2021.
• The bank is pushing heavily into the affluent Florida market.

Except where specified, figures are for the second quarter of 2021:

Merrill Lynch Wealth Management:

• Strong stock markets were good for business. Client AUM rose 29% to $1.2 trillion, a record, compared to a year ago.
• Growth in AUM fees, deposits and loans helped overall revenues. Revenue rose 16% year-on-year to $4.3 billion, a record.
• 6,000 net new household clients, up 4% from year-ago levels; 12,400 households so far this year; record new household size of $1.4 million.
• 79% of clients use the bank’s mobile or online services, up from 77% at the end of 2020.

Bank of America Private Bank:

• Client balances rose 21% on year-ago levels to $580 billion, a record.
• AUM balances rose 22% on year-ago levels to $340 billion.
• 475 net new client relationships, the same as a year ago; 1,140 net new client relationships so far this year.
• 81% of clients use the bank’s mobile or online services, a record.

Wealth advisors:

• Advisor headcount fell 2% in the first quarter due to slower hiring that began last year. A bank spokesperson says that “we expect this hiring to accelerate during the second half of the year” amid “expensive competitive hiring” in the battle for advisor talent.
• Total advisors across Merrill Lynch, Bank of America’s Private Bank and the Consumer Investments unit shrank slightly to 19,385 in the second quarter, from 19,808 in the first quarter. The bank had 20,622 advisors a year ago.
• 93% of Merrill advisors are on track to exceed last year’s results, while 82% are on track to have their best year ever.
• Merrill Lynch is pushing aggressively into Florida’s ultra-high net worth market, where it has 26 teams, up 40% from 19 teams at the start of the year. It aims to have 40 teams in Florida in coming years.
• Advisors have been “particularly successful at attracting ultra-high-net-worth clients during the first half of the year,” and have added more than 300 so far this year, a 60% increase on a year ago
• “We remain committed to organic growth in our advisors and private client sales force as a stronger, more sustainable long-term strategy,” CFO Paul Donofrio said in an earnings call on Wednesday.

Technology:

• The bank is focused on digital engagement, deeper interactions with clients and modernizing its tech platform for advisors and clients to enable “secure and easy collaboration.”
• Technology is fueling deeper engagement between advisors and clients through Erica, an AI-driven virtual financial assistant, WebEx meetings and secure text messaging.
• “Our aspiration is just to follow and push the clients at the same time,” CEO Brian Moynihan said, according to an earnings calltranscript.