Advisors are fleeing Merrill Lynch in unprecedented numbers, a trend closely tracked by The Gershman Group through a dedicated portal. This article aims to provide a comprehensive update on this exodus. Bank of America’s CEO, Brian Moynihan, consistently rebukes the Global Wealth division, branding it the “least efficient” within the firm, a sentiment he echoes every quarter. Co-presidents Lindsay Hans and Eric Schimpf propose a technological rescue mission, emphasizing digital onboarding and Mother Merrill’s centralized control over investment decisions, all at a fraction of the cost. Specifically, for the same platform, it is 10% private bankers salary and bonus 70% is subjective annual bonus in-house for risk-averse, firm selected, strategies. Seasoned advisors accustomed to tailoring solutions are stunned, the underlying message is one of mistrust and a sweeping assumption that they lack the capability to manage it themselves. Thus, control is being wrested away in the pursuit of efficiency and, inevitably, firm profitability.

Recently, The Gershman Group, facilitated a move out of Merrill to UBS, a team amongst hundreds the firm has assisted with moves. What strikes us as interesting is the number of “Merrill Lifers” who are leaving the firm. Advisors aren’t leaving simply for the rich packages with a large upfront payment and salary plus a transparent pay GRID for their monthly business, but the opportunity to grow significantly as many teams have booked growth upwards of 30%. Beyond that, advisors felt that Merrill’s limitations, demands, and pressure to put clients in banking products that didn’t make sense (read violation of Reg BI for which there are consequences) led to significant client attrition.

As Merrill drives towards the private banking model versus wealth management, let’s compare the two.

The private banking model?

1. Private bank pays a salary plus a bonus, 10% of what advisors make, 75% of that 10% is subjectively paid at year’s end based on the performance of the overall bank
2. Institutional asset management – assets are managed by the firm and there is no customization, assets are managed per the firm’s models in a cookie-cutter manner, internally managed, a lot less expensive to manage assets internally then it is to have hundreds of SMAs and alternative investment solutions, and much more profitable
3. One client compliance model – instead of needing to police individual advisors or teams, the firm policies just private banking as a whole for risk, one model for the firm in total
4. Private bankers work as a team for the bank, therefore the clients are the clients of the bank
5. The clients receive one uniform, consistent offering including asset management, lending, trust services, etc.

The typical wealth management model?

1. 50% payouts + benefits, plus the platform costs, winds up being significantly more expensive than a private banking model
2. The advisor or team chooses how to invest assets and hand-picks money managers, each client receives a customized solution that the advisor believes is in the best interests of the clients, therefore it is considerably more expensive for the firm
3. Each advisor needs to be policed from a risk and compliance perspective, every single advisor from their emails to their asset allocations to all their communications
4. The firm views that there is a risk of lawsuits more so in wealth management due to the individual and customized nature of the business than private banking

Bank of America is pivoting towards a private banking model, viewing it as the most lucrative avenue, albeit erroneously assuming it serves the best interests of both advisors and clients. Although the salary-plus-bonus model yields greater profits for the firm, it comes at the expense of service quality and advisor satisfaction. To dismantle the old model, Merrill Lynch has executed a series of cuts: slashing excesses, reducing payouts, streamlining management, eliminating risks, and even eroding the prestige of its brand.

Roger Gershman of The Gershman Group, an advisor to many on such transitions, remarks, “The very essence of the advisor, fundamentally an entrepreneurial endeavor, has been hollowed out.” What was once a realm of autonomy is rapidly diminishing. Despite Hans and Schimpf’s boasts of increased advisors and assets under management, third-quarter revenue has plummeted by 13% year over year. For young advisors, hurdles have mounted, and the dissolution of community markets signifies a major departure from Merrill Lynch’s longstanding ubiquity. What remains in the wake of these changes is a commanding corporate machine, far removed from the entrepreneurial mindset of its seasoned advisors who built their books on customization and white glove service.

In addition to the above, advisors frequently complain about the oversight of operations and compliance in their everyday affairs. One advisor told us that “I can’t send an email without it being flagged, just to simply send an email takes time with operations to defend to have it sent. This is not the speed of business today.” Further he mentioned that any thought pieces, events, speaking engagements and so on must go through heavy scrutiny, and if something is in person, a compliance officer must always be in the room. To say that such advisors have just “had it” is an understatement. Oftentimes when advisors speak with consultants, they are so exhausted with all the red tape that they simply want a way out as fast as can be arranged.

Clients are advised to brace for a shift towards automation and interactions with artificial intelligence as the firm embarks on a digital trajectory. Merrill’s cachet is dead on arrival, both advisors and clients have become increasingly aware.

TGG

As the Editor of The Gershman Group, a boutique financial services consulting firm, TGG brings expertise in financial analysis, strategic planning, and market research. With a keen eye for detail and a passion for helping businesses navigate complex financial landscapes, TGG delivers insightful, high-quality content to empower informed decisions. Backed by years of industry experience, TGG makes complex topics accessible through clear and compelling communication, shaping the firm’s thought leadership and commitment to excellence in financial services.