Merrill Lynch’s claim branded ‘ridiculous’

Boast about client retention fails to hold weight with some observers

Merrill Lynch’s claim branded ‘ridiculous’
Last week we told you how one company was bucking the trend and hanging on to clients even when their advisors leave the company (see ‘Company retains clients from renegades’). However, some observers don’t appear to believe the claim.

Merrill Lynch has suggested that over the last three-four years it had been able to retain 40-50 per cent of assets from renegade financial advisors – those who left the Bank of America firm to join other companies or start up on their own. It states that its’ figures are based on assessments of 12month periods after the financial advisor jumps ship – the sufficient period needed to move portable accounts.

However, a number of experts have expressed their own disbelief in the claims.

According to Ron Edde, an FA headhunter, former Merrill advisors usually take 75-85 per cent of assets under management with them when they move to another company: and this can even be as high as 90 per cent on some occasions. He described Merrill’s claims as “ridiculous” and commented that he had “never seen Merrill or any other wirehouse retain 50 per cent of an advisor’s assets”.

Brent Vandermeer, however, portfolio manager and director at Vandermeer Wealth Management, believes there may be some truth to Merrill’s claims due to the strength of its brand, albeit he believes that the client-advisor relationship usually comes first.

“If the institution has a strong brand and the client is partly loyal to that brand there is some stickiness to the assets,” he said. “For example, here in Canada the banks often carry more loyalty than the independent brands – the client “likes” being part of the bank’s family. So Merrill has likely benefited since ’08 with recreating their brand and loyalty and they may indeed be keeping clients who perceive value in what the firm itself offers over and above the advisor. 

“That said, the real relationship is always between the advisor and the client… and that is powerful. Most clients 100 per cent rely on the advisor and trust them implicitly and will do what they say and follow where they go as long as there is a sound, logical and beneficial reason offered for doing so. I’d say Merrill could be grandstanding a little but I really have no way of knowing.”

One man who perhaps does have a way of knowing, however, is Thane Stanner, director of wealth management and portfolio manager at StennerZohny Investment Partners+, a multi-family office within Richardson GMP Limited. He worked for Merrill Lynch Canada before it sold its Canadian wealth management group to CIBC World Markets in December, 2001.

“The big US firms are providing more services to, and cross selling wealth management loans and private banking services to their higher end clientele, so intuitively I could actually see the 45-50 per cent retention rate currently being reasonably accurate,” he said.

“The retention strategies of firms when an advisor leaves are really aggressive these days by the big NA firms: legally they try to slow down the departing advisor, and secondly they really aggressively try to retain the clients by assigning many advisors on to the departed advisors’ client base to try to retain swiftly. So it’s a type of ‘Jump Ball’ scenario for clients.

“The retention rate of a moving advisor will definitely range however, based on their tenure with the clientele, the depth and trust of the relationships built, and candidly, likely the performance they have had over both the longer term as well as recently. The last almost seven years has been a strong bull market rise, with the last 12 months or so flat to client relationships will be tested either way here for departing advisors.”

What do you think of Merrill’s claims? Do you think it’s possible to retain 50 per cent of clients’ assets when an advisor moves on? Leave a comment below with your thoughts.