In the game of musical chairs that is veteran broker recruiting, Bank of America Merrill Lynch was left without a seat coming out of 2014.
Last year, Merrill Lynch lost some 45 advisers who managed around $18.6 billion, an 80% increase from $10.1 billion in 2013 and more than any other firm, according to moves tracked by
InvestmentNews' Advisers on the Move database. After advisers coming into the firm are factored in, Merrill lost $6.6 billion in assets.
The peak of departures came in the fourth quarter, when advisers managing $6.2 billion left,
according to the database, which tracks moves of larger teams that are announced by the hiring firm. As a caveat, that means that the numbers may not be inclusive of all the hires or departures made by firms, and not all the assets announced usually end up moving.
But those who jumped ship from Merrill Lynch included many long-time veterans and big-name producers, such as Samuel Spanos, a nearly 35-year veteran of Merrill Lynch whose team manages some $535 million in assets. The Beaver, Penn.-based group
moved to Raymond James & Associates in December.
Some long-time managers left as well. Thomas “Ted” Durkin, who was a well-known director for the Delaware Main Line Complex of about 212 financial advisers, departed after a 20-year career at Merrill Lynch that spanned a number of roles from adviser to head of affluent client strategies,
according to his LinkedIn profile. He has agreed to join UBS Wealth Management, although he has not yet started at the firm and did not respond to a message requesting comment.
The reasons for the dramatic pick up in departures point back to the financial crisis. Interviews with recruiters and some of those who have left, including Mr. Spanos, mostly revolved around the cultural shift that has been happening since the acquisition by Bank of America in 2008.
“I'm not saying anything bad about the bank,” Mr. Spanos said. “The bank has a business to run and the management of the bank has an obligation to shareholders and the board of directors. Everyone is doing their job. But my job is to take care of my clients.”
Among the complaints: The firm, like its wirehouse brethren, has been pushing advisers to move upmarket, making it less profitable for them to serve mass-affluent clients. At the same time, Merrill Edge, which operates as part of Bank of America and serves clients with $250,000 in assets or less, has misappropriated the Merrill Lynch name, some felt. Other reasons: Fees for some clients have gone up with the roll out of the firm's Merrill Lynch One platform, and retention deals given out to large producers during the merger have or are close to expiring.
“At the crux of the culture problem is that Bank of America is not used to their employees having as much autonomy as the typical Merrill Lynch adviser,” said Danny Sarch, an industry recruiter with Leitner Sarch Consultants.
Some scary moments also spooked some of the larger producers, who witnessed the termination of major teams, including the $2.5 billion private banking team of Stephen Brown and James Goetz in Rochester, N.Y. According to a team member, the firm had been engaging for years in well-intentioned activities such as helping clients pay bills, but suddenly found themselves punished for not going through proper channels, such as the firm's official bill-pay system.
A spokeswoman for Merrill Lynch, Susan McCabe, declined to comment beyond the brokers' U-5, which provides the reason for discharge as “conduct related to not disclosing private securities transactions.” The brokers' attorney, however, has said
they are considering fighting the allegations.
In any case, “it makes people wonder culturally, 'Well, my firm used to have my back, but now if you do something they will look to fire first and ask questions later,'" said Mark Albers, a former Bank of America Merrill Lynch manager who left the firm in 2012 and now recruits mostly out of the wirehouses.
While the firm has yet to report fourth quarter earnings, any immediate impact of those defections has not yet spoiled the results for the firm.
Although market performance has certainly helped, Merrill Lynch advisers are still some of the most profitable in the business, bringing in some $1.1 million in annual revenue on average, according to quarterly earnings reports. But headcount has been falling relatively steadily from close to 16,000 in the first quarter of 2009 to 14,000 at the end of the last quarter.
Even if all the advisers who had left had taken all their assets, it still would be only 1% of the firm's more than $2 trillion in total client balances, which includes deposits and loans, according to quarterly reports. The firm also brought in $12 billion in assets last year from more than 70 teams with $100 million or more in assets, according to a source at the firm who asked not to be identified given earnings had not yet been reported.
“The financial results of our business have never been stronger and adviser turnover is at historic lows,” said Susan McCabe, a spokeswoman for the firm, in an email.
Merrill Lynch is also investing large sums in goals-based planning, having spent $100 million on the Merrill One roll out last year, which is about a tenth of what the executives expect to spend on additional upgrades to its platform and mobile apps in the next couple years. And while that results in fee increases for some clients, the Merrill One system has won the praise of Mr. Sarch and others in the industry for giving advisers a better view of clients' overall portfolios, including assets outside the firm.
And the top brass at Merrill Lynch, including John Thiel, who has spent his career at the firm and rose through its ranks from a broker to head of Merrill's wealth unit, isn't the problem either, according to Mr. Spanos.
Some veteran brokers had been quoted in stories in
Fox Business and other outlets as being turned off by his approach in asking advisers to find their “noble purpose” and serving wheat grass at a meeting of big producers along with a wellness lecturer and meditation.
While some advisers who have left claim independence was a driving factor, a little more than half of the assets they managed, $9.4 billion, stayed in the wirehouse channel, according to
InvestmentNews data.
Merrill Lynch, meanwhile, has been undeterred and recently implemented changes that could be seen as adding to some brokers' frustrations, such as penalizing brokers' payout starting this year if they don't make at least one referral to the bank or if they have a large number of affluent households under $250,000 in assets in their book of business.
“Those are things that drive brokers crazy at all these big firms,” Mr. Sarch said.
It remains to be seen if the trend continues this year.
“If I'm a forward thinking executive [at Merrill Lynch], I want to know why these guys left,” Mr. Sarch said. “If I really care about the future of my organization, six months after these guys leave, I'm calling up a senior leader on the team saying I want half an hour of your time and getting the real reasons.”
