losses from the subprime crisis, is to step up the expansion of its
wealth management business abroad. Over the next five years, the
firm wants to triple its non-US revenues in the global wealth
arena.
This will generate new growth as well as help create the stability
of revenues that private client advisory businesses typically
bring, according to the US brokerage’s new chairman and chief
executive, John Thain.
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Most of the firm’s wealth business is still US-oriented, he said,
speaking to a financial services conference in New York, declaring:
“One of the focuses you will see is growing the wealth management
business overseas.”
Despite Merrill’s involvement in subprime turmoil, officials insist
that its wealth operations are performing strongly, saying the firm
saw $80 billion in net new asset inflows last year, the best since
2000. “The core franchise is healthy and growing; the brand is
alive and well,” they said.
The firm added more than 800 financial advisers to take the total
to more than 16,000, the biggest workforce of any global wealth
player.
Thain did not elaborate on specific growth plans internationally
but noted that the company overall was strongly represented in
Brazil, India and the Middle East, although it needed to expand in
high-growth China.
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By GlobalDataWealth management will increasingly be a core Merrill business, as
it is a service that is much less sensitive than volatile areas
such as investment banking and capital markets, he said. Merrill’s
Global Wealth Management division reported net revenues for the
fourth quarter of $3.6 billion, up 12 percent from the same period
in 2006. Net revenues for full-year 2007 rose 18 percent to $14.0
billion.
Within global wealth management, the key Merrill global private
client group reported fourth quarter net revenues of $3.3 billion,
the second highest in any quarter and up 10 percent from the
prior-year period. Net revenues for full-year 2007 were a record
$12.9 billion, up 14 percent year-on-year.
Merrill shifted more than $100 billion of client assets during the
fourth quarter from fee-based brokerage accounts to other types of
accounts, most of which were also fee-based. Virtually no client
assets were transferred outside of Merrill Lynch, it said.
The firm had $1.75 trillion of private client assets at the end of
2007, which should help it retain its position as one of the top
three global wealth managers along with UBS and Citigroup.
In terms of financial adviser productivity, each adviser generated
an average of $850,000 of revenues, according to Merrill data. As
this adviser count includes a significant number of trainees, the
true productivity number is claimed to be much higher. Last year
was the fourth consecutive year when Merrill increased its
financial advisor workforce by at least 5 percent.
Meanwhile, Merrill attracted significant deposits from private
clients in the various banking units in the firm. Merrill has $100
billion of deposits “in our banking operations so this is great
funding opportunity for us. We will be looking more how we use
those deposits around the system,” said Thain.
