Bank of America Merrill Lynch's wealth management profits grew 4% despite a slight drop in adviser headcount, the wirehouse reported Tuesday.

The bank's Global Wealth & Investment Management unit, which includes Merrill Lynch and U.S. Trust, reported net income of $770 million for the first quarter. This is the first earnings results reported for the Merrill business since Andy Sieg took over as head of the unit from John Thiel in January.

Sieg recently touted his goal to grow the firm's headcount by ramping up recruiting and training efforts. But Merrill Lynch's brokerage force shrank by 145 from the previous quarter, slipping to 14,484 advisers. The firm attributed this decline to seasonally lower hiring and an increase in retirements during the quarter. Headcount, however, was up 72 advisers year-over-year.

Some advisers who have left the firm in recent months said they departed because of Merrill's plans to cease offering commission-based retirement accounts as part of efforts to comply with the fiduciary rule. Morgan Stanley picked up at least three Merrill teams over the policy difference. Those advisers managed more than $500 million in client assets.

Slideshow
Advisers on the move: Merrill Lynch loses 6 teams over fiduciary changes
The advisers oversaw nearly $900 million in combined AUM, and moved to Morgan Stanley, Raymond James and HighTower.

For its part, Merrill has said its policy is intended to benefit clients and is part of a long-term strategic shift in its business. Clients seeking commission-based retirement accounts also have options through Bank of America's other business lines, such as Merrill Edge.

The company reported record long-term AUM flows of $29.5 billion for the quarter, up from $18.9 billion for the year-ago period, which the bank attributed in part to clients shifting from brokerage IRAs to fee-based relationships.

Merrill also says that more advisers are shifting to fee-based business. Approximately two-thirds have 50% or more of their client assets under a fee-based relationship, up from one-third five years ago. That transition comes after the wirehouse said it would cease offering commission-based retirement accounts as part of its plan to comply with the fiduciary rule. The firm has since indicated it would be flexible on that policy.

Meanwhile, the Department of Labor has postponed the regulation's implementation date to June while it conducts a review of it.

(Bloomberg News)
(Bloomberg News)

RECORD MARGINS

Merrill Lynch's client balances rose 8.5% year-over-year to $2.167 trillion. Revenue increased 3.1% to $3.782 billion.

The wirehouse's adviser productivity also rose, reaching $999,000 per Merrill Lynch FA, up from $960,000 from the previous quarter and $984,000 for the year-ago period.

U.S. Trust's revenue grew 4% to $809 million, the highest level since 2009, per the firm. The number of private client advisers increased by 14 from the prior quarter to 367.

Overall, Bank of America's wealth management business hit a record pre-tax margin of 27%, up from 26% for the year-ago period.

The company also said that referrals to and from the unit to other areas of Bank of America increased 25% year-over-year.

Revenue grew 4% to $4.592 billion, boosted in part by growth in net interest income, which rose to $1.56 billion from $1.513 billion.

Register or login for access to this item and much more

All On Wall Street content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access