Wirehouses: Just say no to broker number disclosure

April 21, 2021

Given the shift in wirehouse priorities, two of the biggest, Merrill Lynch and Morgan Stanley Wealth Management, made it harder last week to keep track of exactly how many consultants are working in their full-service brokerage units each quarter.

As evidence of its drive to integrate banking and brokerage, Merrill’s parent bank, along with its first quarter results, reported a single workforce of nearly 20,000 advisors in its wealth management businesses for the first time. The new balance sheet included the core Merrill brokerage as well as wealthy bulk brokers at Merrill Edge and paid advisors at Bank of America Private Bank. In its previous coverage, the BofA had separated the core and edge brokers from the private bankers.

Morgan Stanley went a step further and eliminated the number of brokers in its wealth management business, which a spokeswoman put at only “around 16,000,” including the advisor-led core force and several hundred call center brokers she worked with E * Trade Financial had acquired.

The changes highlight the evolving business models of companies moving away from commission and investment sales in favor of growing fee assets, cross-selling customers, to banking relationships and metrics that are less reliant on just occupying seats, said Michael Wong . Director of Equity Research at Morningstar Research Services.

“The size of the broker sales force used to be a key indicator of the company’s health and ability to generate more commissions,” Wong wrote in an email following a telephone interview on the subject. “In the age of selling clients through more than commissionable deals, companies hope to keep shareholders focused on new net assets, new accounts, chargeable assets, asset management client loans, and other metrics.”

In discussing the first quarter reports last week, both Merrill and Morgan Stanley executives stressed the importance of the number of individual brokers to their overall business.

“We are considering our wealth management business across this continuum of offerings,” said a Merrill Lynch executive of the mixed workforce. “And we are increasingly seeing that our talent as a consultant moves across the continuum.”

The change comes at Morgan Stanley as the company expands beyond its core brokerage roots into areas such as self-directed brokerage and corporate stock plan services with its fourth quarter E * Trade acquisition.

“Once upon a time when we only had the core business, that number of financial advisors and productivity per financial adviser were basically the only two metrics you had to follow. And now we have 30 different things that are on the rise, “Morgan Stanley chief executive James Gorman told analysts in a call on first quarter results. The emphasis on the larger metric pool reflects “a very different view of the wealth management business” that his bank has adopted, Gorman said.

Wirehouses have, of course, hired fewer staff in recent years as they have faced an increase in the retirement of experienced brokers, the migration of independent or registered investment advisory channels, and challenges in completing the next generation of trainees.

Merrill’s sales force had been in decline for several quarters before the first step was taken in 2019 to combine the roughly 14,600 core brokers with 2,600 Merrill Edge consumer brokers, while private bankers continued to be reported separately.

“The unstoppable trend is for the number of consultants in the industry to decline,” said Danny Sarch, a real estate recruiter based in White Plains, New York.

Bill Willis, an industry recruiter in Palos Verdes Estates, Calif., Suspects that wirehouses hired accurate reporting of the exact number of their employees because their executives “are tired of competing in this way,” especially as businesses have become “bleak.” are what’s actually on the list, numbers or whether they’ve added consultants from other channels to bolster their reported rosters.

The other two wirehouses, Wells Fargo Advisors and UBS Wealth Management USA, have also made changes in recent years that have made it more difficult to track changes in headcount as their advisory workforce has shrunk.

Wells Fargo, which has lost over 2,000 net brokers since its parent company’s fake account scandal in 2016, has reported around 13,500 advisors in the past two quarters, including around 900 financial and asset advisors overseen by the parent company However, Consumer Bank were integrated into the core group of private customers in the fourth quarter.

UBS has only reported a number of around 6,000 brokers in America in recent years, including several hundred in Latin America and Canada. UBS had previously seen years of sequential declines that dropped roughly 8,000 brokers a decade ago, although executives have indicated that the declines are in part deliberate as they focus on a smaller number of advisors with higher average productivity.

Even so, Morningstar’s Wong said the move is withholding important transparency from shareholders.

“Is it less informative than before? For sure. Is it something i would like to know Yes, ”said Wong.

The number of consultants continues to “signal changes in market share,” said Wong, “and the wirehouses have been losing out at the end of the market share shift for the past decade or more.”

If Bank of America or Morgan Stanley significantly increase the self-directed platforms and add less than full-service FAs that are paid less, Wong said, “This could change their operating margins.”

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