- Title: Head of Merrill Lynch Wealth Management, Bank of America
- Time in Current Position: 2.5 years
- Time with Firm: 24 years
- Previous Employer/Title: Controller & Agent, John L. Alcock Insurance
- Years in the Industry: 30
- First Job in Industry: Accountant, Alvarez & Ferraro
- Alma Mater: Florida State University, College of Business
What will the industry look like in 10 years?
JOHN THIEL: I think it will be team-based. You'll see a different standard of care applied than today's. We think a fiduciary standard will be the rule, and the suitability standard will be a subset of the standard but not the driving standard of care. That requires a much more robust documentation process for advisors than they have today, because it's no longer about whether the investment is right when they recommended it. It's whether it's the right thing every time, every day for the life of that relationship. And so that requires advisors working with fewer clients. They are not going to be able to meet that standard of care and the documentation around that standard of care with 400 clients. You just can't.
I wonder how you could even do that with 100 clients.
JT: I struggle with that too. That's why we started private banking and telling those advisors they can only have 100 relationships. And they really only have about 40 each. We also think the industry will move away from talking to clients in terms of how we think about their money to really talking to them about the way they think about their money, which is outcome oriented. The outcome today is investment performance relative to a benchmark. In my mind, we have let down the public in some regard, because what we found over the past 11 years is that you can beat the benchmark, which was 1%, and fail the client. We need to have a different approach. Clients think, "I need X in retirement, I have to educate my kids, I want to buy a second home, and those are the outcomes I am looking for." So that's the way clients think about money, instead of how well you did versus the S&P or if you added alpha.
Some would say that's a cop-out from advisors who can't beat the market.
JT: Absolutely, we should perform. I'm not saying we shouldn't. But we just proved over the past 11 years that by making that the seminal point, you cannot accomplish what you want. So when I ask a client, "What's a bigger risk: not beating a benchmark or not attaining your goal," he or she says, "Not attaining my goal." And, by the way, we train clients to ask about performance.
Every piece of account information you send clients tracks performance.
JT: That is the transformation we're on. At the end of the day, the punch line of what we are doing and where the industry is goingwell, it's where we're going, and I don't know if the industry will follow, but I know the clients willis that we won't send you that anymore. We will send you a progress-to-goal report. It'll include the performance information, but that will be on page 8 instead of page 2.
How is Merrill Lynch meeting the competitive challenge of the RIA model?
JT: The number one thing that clients want is transparency. They want understandable fees. They will pay them if they understand them. RIAs have found this opportunity to have a more transparent discussion. So what are we doing about that? We just announced a platform that is rolling all client account activity into one platform, with one fee schedule. It's a single program, easy to explain, easy for clients to understand and completely transparent. We eliminated as many conflicts as we couldbut with conflict also comes the ability for our clients to get loans from us, for instance, which is good for our clients.
The RIA model assumes a certain amount of entrepreneurial skill on the part of the advisor, which not everyone has.
JT: And what's their exit strategy? You know what the exit strategy is? They sell themselves back to us. That's what's going to happen. Because the roll-up is not working. The bigger ones are going to grow up and look just like their father, which is us. Not only that, but if I'm doing all the things involved in running a businesspayroll, creating employee policies, time-keeping records, managing employeesI'm not speaking to clients. Still, some people are doing it very effectively. They are entrepreneurs.
How is Merrill Lynch planning to deal with the "gray tsunami" of retiring advisors in the coming years?
JT: That's a real business issue. The one thing we would dispel is the notion that it's impending. One of the things that we know from this particular generation that we call the baby boom generation is that they don't do anything like anyone's ever done before. We are finding that they are working longer than anybody thought they would. I just spoke to one of our advisors who celebrated his 60th year with the firm. The gray tsunami is inevitable, but it's not inevitable when advisors hit 65, because we find that they are working well past 65. They are doing that because they have clients whom they care deeply about and whom they've served for 30 and 40 years. They want to make sure those clients are taken care of, so they are building teams. One of the ways you build teams is to work with people who can bring diversity to your teamit's not only gender but also generational diversity. So we work very hard on forming teams with those diverse components. Also, we never stopped investing in our training program. That's something that a lot of our competitors have been in and out of, but we have maintained that. We have right-sized it over time, and after the crisis, as part of the disaster, we laid off a thousand of our trainees. That was no different from what Goldman or other advisory firms did. But we never ended it. We still had 1,800 trainees. We now have 3,200 trainees. And we're committed to successfully growing the next advisor because that's been our legacy. Now, it's an expensive strategy, but it's no more expensive than recuiting or any other way to attract advisors.
- Number of Employee Channel Advisors: 14,039
- Total AUM: $1.854trillion*
- Average Employee Advisor 12-Month Trailing Production: $1 million
- Average Employee Advisor AUM: Not provided
- % Women Advisors (Not including registered associates): Not provided
- % Minority Advisors: Not provided
*Includes client assets in custody, loan balances and deposits at Bank of America.