Last month, I posted a long discussion on the exodus of asset managers from Merrill. According to several dozen Merrill brokers who emailed me, that post was promptly blocked by Bank of America.

Which is a shame.

Anytime you see a corporate management put its head in the sand, it is a bad sign for the future of that firm. The preference is for transparency, honest responses to criticisms, some degree of self-reflection — not Big Brother censorship. Of course, BofA long ago committed suicide with their Countrywide purchase and other mortgage follies, and exists today only due to the largesse of taxpayers who bailed them out. With that sort of poor decision-making in the DNA of the company, I cannot say I am surprised by yet another example of bad executive judgment.

The investing wealthy have come to a similar conclusion. A new Reuters article this past week is titled Merrill, Morgan Stanley seen losing grip on rich. (I wonder if BofA is going to block Reuters as well?). As it turns out, its much easier to browbeat Congressmen into handing over billions than it is to get the top 1% to do the same.

Here are the key bullet points I picked out of the Reuters column:

2008 Financial Crisis: Have led big investors to lose faith with Morgan Stanley, Citigroup and UBS — all 3 were bailed out by taxpayers — and Merrill Lynch — which was rescued by a Bank of America takeover, which itself was eventually bailed out by taxpayers.• Technology: is leveling the playing field between smaller,more nimble frims and the industry giants.

RIA and family-offices: were the fastest growing firms, increasing assets under management by 18% to $356 billion in 2010 (vs 2% among big four).

Winners & Losers: There were some winners in the asset shift — Private client units of banks such as Credit Suisse, Deutsche Bank, Bank of New York Mellon and Barclays. The Losers? Big 4 brokerages (Morgan Stanley Smith Barney, Merrill Lynch, Wells Fargo Advisors and UBS)

Here’s an excerpt from Reuters:

“The biggest U.S. brokerages have set their sights set on attracting the wealthiest Americans, but a new study concludes a growing number of multi-millionaire households are taking their money elsewhere.

The share of high net worth customers’ assets held by the top four brokers — Morgan Stanley Smith Barney, Merrill Lynch, Wells Fargo Advisors and UBS Wealth Management Americas — has fallen since the financial crisis and will continue to fall, research firm Cerulli Associates said in a report on Wednesday.

That market share, which peaked at 56 percent in 2007, fell to 45 percent last year and is expected to drop to 42 percent by 2014. The companies together had $2.1 trillion in assets from clients with at least $5 million to invest . . .

Merrill, for example, is discouraging brokers from taking on new clients with less than $250,000 so that they have more time to find and work with million-dollar accounts.Consulting firm McKinsey & Co recently declared the $1 million to $10 million account as the “sweet spot” for private banks, because these clients generate higher margins — two to three times more than investors with tens or hundreds of millions of dollars.

Waves of financial advisers, meanwhile, moved to smaller and more independent wealth managers in search of greater stability or fewer conflicts of interest.”

The rich are different than you and I. Its not just that they have more money — they are much more careful with whom they trust it to . . .


Hat tip Josh


Merrill, Morgan Stanley seen losing grip on rich
Joseph A. Giannone
Reuters, Mar 29, 2012

Category: Corporate Management, Investing, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “1% to Wirehouses: BUH-Bye

  1. billsch says:

    Good thing Merrill has a solid RIA business.. oh wait that’s Schwab and Pershing

  2. rktbrkr says:

    Highly paid execs resent successful salespeople who make more than they do so they cut their pay packages, the most successful sales people leave and then they have to pay more to get less when they hire replacements, it’s the American Dream (for successful sales people anyway!)

  3. Sechel says:

    I’m surprised it took the 2008 financial crisis. Account executives for some time have been conflicted, pushing firm mutual funds over no load funds, structured notes over plain vanilla corporate bonds and CD’s and managed accounts that come with high annual fees. And there’s always been the temptation for the A.E. to engage in churning.

  4. Frilton Miedman says:

    Just remembering John thain buying a $12,000 toilet for his Merrill HQ office remodel in the height of the financial crisis in ’08.

    I guess he figured the age of extracting revenues by screwing a few Muppets was still alive and well.

  5. rd says:

    Most people are best off in investing in simple, broadly diversified and balanced mututal funds at places like Vanguard and T Rowe Price. For more complex portfolios for upper middle income, it is hard to beat places like Schwab that were built on providing relatively low-cost, low push financial services to customers.

    Then the very upper middle class and welathy have their boutique wealth management organizations.

    It sounds to me like the Merrill et al “full-service brokers” (which I define as organizations designed to extract at least 2% of your portfolio per annum while producing average to below average results) have become the Oldsmobile of the financial industry. After a while, GM figured out they had to kill the brand because they couldn’t figure out what market it was supposed to target. It was basically just Chevy vehicles with frivolous bells and whistles that raised the sticker price without much benefit which is a pretty good description of Merrill et al.

  6. Truth seeker says:

    Berry, I read your material because you are smart and a SD (sh** Disturber). As a Veteran Advisor of more than 20 years with a successful practice, when I saw the comments here it prompt me to clear a few things up. First Wealthy people that hire us are not stupid, its all relationship based and pricing could be made just if I was a stand alone RIA. Merrill’s problem is they tried to segment their clients and instead of using a carrot , they used a stick to motivate their FA’s in 2012. This is a new policy and its causing departures. I have seen missteps like this happen and ultimately the policy is reversed or someone on the top is fired. You will see this by year end. Also advisors hate the investment bankers because we are muppet advocates & we are one of the muppets. The bankers destroyed Merrill in 2008. The general public does not know that the Merrill Advisors were actually carrying the company in the crisis while the Harvard MBA bankers drove it to the ground. We are in a Bear Market and the longer its here , the more people will need honest good people giving them advice.

  7. [...] comments yesterday, plus some unfortunate softball media coverage, led me to today’s rant. There are few things [...]

  8. willtruth says:

    Could possibly have big implications for the Investment banking business in the US? Just a thought. Less clients = Less capital = Less Distribution?