Merrill sees quarterly new assets slide

Like other wealth managers, Merrill and other Bank of America wealth units saw a decline in net new assets between the first two quarters of the year, as market turmoil made clients hesitant to invest.

Bank of America’s global wealth and investment management unit — which includes Merrill and Bank of America Private Bank — reported $16 billion in net new assets in the second quarter. That was down 33% from the $24 billion in net new assets the wealth management units reported for the first quarter, although still up 29% from the same period a year ago.

Merrill co-head and president Lindsay Hans cited several reasons in a call with media Wednesday for the quarter-over-quarter decline. With interest rates still high, investors continue to “chase yield” by putting cash in money markets, bonds and other vehicles not held in the firm’s advisory accounts. Also, clients tend to set aside money in the second quarter to pay taxes, she said.

A third factor was economic volatility brought on largely by President Donald Trump’s threats to impose tariffs on many of the biggest U.S. trading partners. Markets have not only recovered since then but surpassed their previous highs. But investors found reason to hesitate in the preceding months. 

“You do tend to see in periods such as that, you’re going to see some clients wait, especially when it comes to deploying new money,” Hans said.

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Hans’ comments bore a strong similarity to remarks Citi CEO Jane Fraser made Tuesday about why her firm’s total for net new assets had fallen by 81% to $2 billion in the second quarter.

“We did see inflows slow this quarter as clients were cautious amidst macro uncertainty,” Fraser said. “We are confident we will see a pickup here as markets have recovered.”

Inflows fall but AUM rises

Despite its quarterly decline, Bank of America’s global wealth and investment management unit’s inflows nonetheless helped boost its total for assets under management by 13% year over year to $2 trillion. Of that AUM, Merrill held about $1.6 trillion and the private bank about $423 billion. Adding deposits and loans to those assets under management, the units reported $6.1 trillion in total “client balances,” a figure that also includes deposits and loans. 

Of Merrill and Bank of America Private Bank’s $5.9 billion in net revenue, $3.6 billion came from asset management fees, a figure up 9% year over year. At the same time, the units reported their noninterest expenses were also up 9% year over year to $4.6 billion, “driven by revenue-related incentives and investments in the business, including people and technology.” 

The two wealth management units reported $1 billion in net income. That was down about 3% year over year.

Banking on banking

Like many large wealth managers tied to banks, Merrill encourages its advisors to offer banking products to their clients. That not only helps generate more money for the firm but also helps make clients “more sticky,” or less likely to move their assets elsewhere.

Hans noted that the wealth management units’ balance of loans to investors rose to $7 billion in the second quarter.

“We like that more and more of our clients are leaning into their advisors to be able to access our balance sheet in smart ways,” Hans said. “As a reminder, this custom lending platform, it’s one of a few different lending solutions that we offer through Bank of America. It uses a variety of asset classes as collateral.”

Hans’ fellow president and co-head Eric Schimpf said the number of Merrill clients with a Bank of America checking or savings account increased for the 10th quarter in a row.

“Today, over 62% of Merrill clients have a banking and lending relationship with Bank of America,” he said in the media call.

New client relationships and use of AI, other tech

The wealth units have also been busy adding clients. Merrill brought in about 6,300 new client relationships in the second quarter, and Bank of America Private Bank about 800. The wealth units saw their relationships with clients with $10 million or more to invest rise by 13%, although they did not report a total tally for these high net worth clients. 

Merrill specifically reported its relationships with clients with $500,000 or more to invest was up by a whopping 78%, although again not providing a total number. And the private bank added roughly 435 relationships with clients with $3 million or more.

Merrill said that 86% of its client households engaged with it using digital means in the second quarter. Just over three-quarters of the new accounts secured in the second quarter, for instance, were opened using an online system Bank of America calls its collaborative onboarding experience, or COBE. COBE was also used by clients to book roughly 30,000 appointments in the second quarter and helped reduce the time needed for scheduling from 20 minutes to two minutes.

The wealth units are also using artificial intelligence and similar technologies to, for instance, alert advisors to changes in clients’ lives that may require some action such as claim Social Security, refinance a mortgage or take out a student loan. Nearly 2 million “insights” of that sort were provided by AI in the second quarter. And Bank of America’s “virtual assistant,” a chatbot named Erica, was used to work with customers more than 3.4 million times in the second quarter.

Hans said she thinks many investors will always want to work with human wealth managers. Rather than have AI in public-facing roles, Merrill is experimenting with using it to help advisors prepare for client meetings by sifting through market data and other information and suggest possible discussion points.

“I still own the agenda of that meeting as the advisor, but I didn’t spend several hours gathering the info,” she said. “So I can use my gut, my insight to figure out what’s going to make sense for this meeting.”

Experienced advisor attrition ‘well below the historical average’

Hans and Schmipf also called attention to ways Bank of America’s global wealth and investment management unit continues to invest in its advisor workforce. Hans said about 2,400 industry newcomers are now enrolled in the firm’s training program for fledgling wealth managers. Separately, existing advisors are taking part in the firm’s “Level Up” offering, which pairs them for learning purposes with more experienced, high-performing colleagues.

“It’s a series of virtual training and coaching sessions,” Hans said. “We just launched it, and we have over 1,000 advisors that are going through the program.”

Like many wealth management firms, Merrill no longer reports an advisor headcount. After a long period when it ceased trying to lure advisors from rival firms, Merrill has resumed recruiting and seen some success. This spring, for instance, it announced it had pulled over an advisor formerly managing $1 billion for UBS in New York.

Echoing comments that Bank of America CEO Brian Moynihan made at an industry conference last month, Schimpf said Wednesday that advisor retention remains just as strong a priority as recruiting.

“It’s a number we don’t share, but very proudly, we would state that experienced advisor attrition at Merrill is well below the historical average, not only this quarter, but for the last few,” Schimpf said. “Again, that’s something that Lindsay and I are very proud of — the work that we do with our advisors, the training of new ones and looking for select hiring in a very competitive marketplace.”