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Bank of America wealth management loses small brokers

Published 07/18/2016, 06:23 PM
Updated 07/18/2016, 06:23 PM
© Reuters. The Bank of America logo is seen at their offices at Canary Wharf financial district in London

© Reuters. The Bank of America logo is seen at their offices at Canary Wharf financial district in London

By Elizabeth Dilts

NEW YORK (Reuters) - Bank of America's (N:BAC) wealth unit is losing financial advisers who cannot meet performance targets because their books of business are too small, Chief Executive Brian Moynihan said on Monday.

Big wealth management firms have been implementing tougher goals for advisers in recent years, pushing them to recruit richer clients, lend more and spend less time on clients with few assets. Advisers who cannot meet those targets have been retiring, moving to smaller firms or leaving the industry entirely, recruiters say.

"The attrition we see is ... in the lower production levels, mainly due to people not being able to build a book of business," Moynihan said on a call with analysts about the bank's second-quarter results.

Bank of America's wealth unit reported $722 million in quarterly profit, an 8-percent rise compared with the year-earlier period. Its profit margin rose to 26 percent from 23 percent, as revenue declined 2 percent to $4.5 billion.

The business, which includes Merrill Lynch, has played a significant role in Bank of America's strategy to grow revenue from more stable businesses that require relatively little capital. The broader bank reported a 19-percent profit decline.

The wealth business has recently been helped by the expiration of expensive retention bonuses, paid to Merrill Lynch financial advisers as an incentive to stay when it acquired the brokerage in 2009. The last installment of those bonuses was paid out in the fourth quarter of last year.

Moynihan said experienced advisers are not leaving because the bonuses evaporated. Experienced advisers who have left over the last year have done so because the wealth unit has pulled back from international markets, he said.

Merrill Lynch's headcount rose by 151 over last year to reach a total of 14,416 advisers. The number of Merrill advisers has fluctuated over the years, from nearly 15,000 in 2012 to roughly 13,750 in early 2014.

Bank of America is "busily implementing" changes related to a new Labor Department rule that will require advisers to act in clients' best interest, Moynihan said. Management does not expect the rule to impact revenue significantly, he added.

© Reuters. The Bank of America logo is seen at their offices at Canary Wharf financial district in London

Analysts had expected big banks to report weaker wealth management results, as market volatility made clients uneasy about investing.

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