- Bank of America’s massive wealth arm has hiked trainee financial advisers’ starting salaries by $10,000.
- “We’re trying to do a better job communicating what a career as an adviser looks like, and what it’s like getting started,” Merrill Lynch Wealth Management head Andy Sieg told Business Insider.
- Merrill has hired 1,700 financial adviser trainees so far this year. It’s retreated from making experienced hires.
- It’s also deployed 75 performance managers around the country to coach new advisers, tracking things like how many meetings they have with potential clients.
- The war for young adviser talent has ratcheted up in a tight US labor market — and around a third of advisers industry-wide are seen retiring in the next decade.
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Bank of America’s Merrill Lynch Wealth Management has sweetened starting salaries for trainee financial advisers, hired 1,700 newbies so far this year, and deployed performance managers around the country to coach them.
It’s all part of the firm’s push to draw new talent for overseeing its some $2.4 trillion in client balances as an adviser retirement cliff looms.
We spoke with Merrill Lynch Wealth Management President Andy Sieg about how the firm has had to change up its playbook for hiring and training future advisers to add to its nearly 15,000-strong “thundering herd.”
Adviser demographics are “one of the realities of the wealth management industry that has not received a lot of attention,” Sieg said, and firms need tackle how to position the next generation.
Merrill hiked starting salaries for trainee advisers by some $10,000 six months ago — the average is now $65,000, plus performance hurdles to bring total pay above that base. The firm’s broader market and competitive pay practices are reviewed on a continuing basis.
When asked how that salary stacks up with other wirehouses, Sieg said: “I think it’s in the zone.”
Honing the pitch is critical, especially for big banks looking to wealth to balance more volatile activities like trading.
Young people working in wealth tell Business Insider that the allure of lucrative fields like tech, the daunting challenge of drumming up business as a newbie, and lingering unease with the industry for those who came of age during the financial crisis help explain why the jobs may have seemed less appealing.
To be sure, Merill is not the only wirehouse — the term for big, full-service broker-dealers — looking at that pool. For one, we spoke with Wells Fargo Advisors last month about coaching, outreach, and client handovers.
Read more:Wells Fargo has seen 1,000 financial advisers depart since its sales scandal broke in 2016. Here’s how it’s fighting back to retain talent and attract young hires.
While Merrill has a training program that dates to the 1950s, today it has moved beyond simply instructing people to sell stocks and bonds. It focuses on financial planning and also selling broader offerings like mortgages from Bank of America, which bought the brokerage during the depths of the financial crisis.
Still, Sieg said graduation rates from Merrill’s trainee program were “not as high as we would like.”
Over the past nine months it deployed 75 performance managers across the US to be more hands-on. That includes tracking things like meetings and presentations with potential clients. The firm does not release trainee graduation rates.
When it comes to experienced advisers, Sieg said it’s doing limited recruiting, but “it’s pretty narrow, and the economics are very different than they used to be.”
In that respect, Merrill is focused on advisers from regional firms and independents who have been in the business for roughly two to eight years. They get a three-year guaranteed salary, and then are put on a performance-based payout grid.
Merrill had 14,690 financial advisers at the end of June, according to filings, down from 14,820 a year earlier. That excludes consumer banking advisers. The firm’s total wealth advisers, including FAs, were 19,512 — up from 19,350 in 2018. Productivity per person has edged up meanwhile.
Trainee hiring at ‘real scale’
While the firm has retreated from experienced hires to focus on making existing advisers more productive, Sieg said hiring is happening at “real scale” for its financial adviser development program. Merrill has brought on 1,700 new advisers this year through the third quarter for its training program.
It has some 3,500 trainees in its multi-year program overall. Through the third quarter, it hired 100 more advisers than the same time last year.
Merrill sees a team environment with experienced advisers as part of setting them up for success.
“We’ve moved well beyond the day of a sole practitioner in our business. Eighty percent of the advisers at Merrill Lynch today are on teams,” he said. That gives people access to a relatively wide customer base, but means they also need to specialize skills quickly — in investment management, planning, or business development, for example.
That usually happens by trainees’ third or fourth year. “It becomes more important at that point in your career because now you don’t just have 10 clients. You may have 50 clients,” Sieg said.
Read more:UBS Americas private-wealth head says he thinks losing a ‘few hundred’ advisers would not be a bad thing, and is looking at how robos can help keep the bank’s richest clients
‘Support and discipline’
To be sure, the business is a “a very challenging career path,” Sieg said, and a successful adviser needs a range of skills to stand out in a crowded field.
Merrill is trying to tackle attrition at multiple points. Sieg said there’s a percentage of dropouts from people who realize one year in that they didn’t “understand what this career was all about.”
“We’re trying to do a better job communicating what an adviser’s career looks like, and what it’s like getting started,” he said.
A second dropout wave comes from failing required licensing exams to buy and sell securities, and the firm is looking to tools like self-diagnostics to help people pass.
Then comes learning the client service aspect, which was where the firm thought it could take it to the next level. It has been using technology and week-long group sessions around the country to bring trainees together.
But it also realized that senior field managers, who also oversee things like compliance and supervision for existing advisers, needed more help with young talent.
It has been deploying 75 managers focused solely on the trainee program, which Sieg said added “a sense of both support and discipline.” That hiring was rolling and only recently wrapped up.
Read more:Morgan Stanley’s wealth management arm is now the most profitable it’s ever been. Wall Street is already questioning how long that can last.
Wealth management overall drew roughly 20,000 new trainees in 2018, according to research firm Cerulli Associates, an 11% drop from 2017. Around three-quarters of trainees failed out of the industry — encompassing wirehouses, independent registered investment advisers (RIAs), and others not including pure robo-advisers — in-line with recent years.
“Clients worry about — what if something happens to the financial adviser that I’ve gotten to know over the years, and I’ve grown to trust; if he or she retires?” Sieg said.
The majority of advisers industry-wide at end-2017 were between 55 and 64, according to Cerulli. Only around 9% are under 35.
“New advisers joining our firm 30 years ago couldn’t have imagined the breadth of capabilities that we have today,” Sieg said.