Merrill Lynch Wealth Management added almost 4,800 net new clients in the third quarter, staying “relatively consistent” to previous periods and a satisfactory result “given the quieter summer months,” said Merrill Co-President and Co-Head Lindsay Hans, during a wealth-specific third-quarter earnings call.
However, the firm saw a considerable change in the affluence of new clients, which Merrill considered a core part of its growth strategy.
“More specifically, new clients with over $500,000 make up a larger share of our growth, and the number of net new $10 million+ clients doubled in the quarter versus the same period last year,” Hans said.
The average deposits in Bank of America’s Global Wealth and Investment Management division dropped to $280 billion, down 4% from a year ago and 3.6% from the previous quarter.
But the firm’s total client balances in wealth (including BofA retail, Merrill Wealth Management and Private Bank clients’ investments, deposits and loans) hit a record high of $5.9 trillion, including $3.5 trillion in Merrill Wealth, an 18% year-over-year increase, according to the firm’s third-quarter earnings.
Merrill Lynch and the Private Bank posted $5.8 billion in revenue, up 8% year-over-year, which the firm attributed to higher asset management fees based on higher market levels and strong AUM flows. Fee-based flows were approximately $61 billion year-to-date, a 32% year-over-year jump, driven by new client acquisitions and “advisors working with the existing clients to reinvest assets.”
The earnings are the first since the Federal Reserve cut rates by 50 basis points in late September, with more cuts possible later this year. Earlier this year, BofA also opted to raise the amount it paid on bank and sweep deposits for the first time in several years.
Merrill Wealth Co-Head and Co-President Eric Schimpf said the firm couldn’t make “forward-looking” statements about how rates may change in the future besides committing to “price in line” with markets, including cash alternatives and money market funds.
“As everybody knows, we made several changes to our pricing in lieu of the interest rate environment, and we did that earlier this year,” he said. “And we will continue to do that, and we’ll continue to make sure that we re-price deposits in line with market and cash alternatives, and we’re proud of the action we took.”
Nancy Fahmy, the head of the Investment Solutions Group for Merrill and Bank of America Private Bank, said the firm was seeing “an acceleration of cash moving off the sidelines.” While client cash balances reached four times higher from when the Fed began raising rates, the recent rate cut has been a "catalyst" for advisors and clients "really looking to put their cash to work."
She also detailed the bank’s greater emphasis on alternative investments, noting that the firm was adding about 50 new alternative investment funds to its platform each year and was seeing particularly strong interest from clients in areas like private credit and infrastructure.
According to Fahmy, BofA clients accessing alts have doubled over the past five years, and year-over-year flows into alts are up 30%. In a recent study of the firm’s wealthy clients, 93% of clients ages 21 to 43 reported they’d likely increase their alt allocations in the next several years.
“We're incredibly proud to lead the industry working with third party partners to innovate in order to make alternatives accessible to a broader set of our clients,” she said.
