Merrill Grows Wealth Management During Difficult, Disappointing Quarter

Matthew Smith

18 July 2008

Merrill Lynch continued to grow its financial advisor force despite cutting as many as 3,100 people from the broader business during the second quarter, according to the firm’s latest earnings announcement.

Merrill Global Wealth Management reported a net increase of 490 advisors to 16,690 FAs world-wide since this time last year.

Merrill chief executive John Thain described the quarter as “difficult” and the net loss of $4.7 billion as “disappointing” during the earnings call in New York after the market closed last night.

Mr Thain blamed the firm’s mortgage and mortgage related positions for the poor results; the loss contrasted against a net earnings gain of $2.1 billion for the same period last year.

But despite announcing large staff cuts and asset sales, the GWM business continued to hire FAs both in the US and abroad.

Merrill chief financial officer Nelson Chai said the firm added 140 advisors within its top two tiers of FAs in the US during the second quarter.

Merrill also continued to expand its advisor force internationally, increasing its international FA headcount by 11 per cent year on year for the quarter.

Overall GWM posted a second-quarter gain in net revenues of $3.4 billion, down 5 per cent from the second quarter of 2007.

Within GWM, the firm’s Global Private Client business posted net revenues $3.2 billion for the period, down 3 per cent from the prior-year period; Global Investment Management earned $193 million, down 37 per cent from the previous year.

Total client assets in GWM accounts remained static at $1.6 trillion at the end of the second quarter.

Overall, Merrill has been selling assets to create liquidity in the business.

The firm confirmed during the earnings call it had concluded the sale of its 20 per cent stake in financial data provider Bloomberg for $4.425 billion; and it had signed a letter of intent to sell FDF, an administration business in the US, for $3.5 billion.

“We are de-risking our business,” said Mr Thain. “We are shrinking our balance sheet… we are an extremely liquid business.”

Mr Thain also confirmed Merrill would not sell its stake in asset management firm BlackRock. Upon news Merrill would keep its stake, shares in BlackRock rose 20 per cent before markets closed, according to published reports.