Bank of America's Merrill Lynch unit plans to recruit as many as 500 Series 7 licensed financial solutions advisors to man its branches in key markets over the next three years, augmenting its Merrill Edge call center. The bank has hired 100 so far.
These advisors are salaried, just like the officers manning the call centers, so they don't compete for business with Merrill Lynch's full-service financial advisors. Somewhat like platform reps, they'll be able to sell bank products as well as investments to clients who don't meet Merrill Lynch's $100,000 threshold to work one-on-one with a full-service Merrill Lynch advisor, says Sophie Schmitt, senior analyst at Aite Group in Boston. Schmitt is the author of a new report on the bank's brokerage model, which is controversial or forward-thinking, depending who you speak to.
Schmitt says that hiring officers to meet face-to-face with call-center customers helps ease advisors' concerns that moving lower-level accounts to the call center would damage future opportunities to work with these same clients if their accounts rise above the $100,000 threshold.
To be sure, Merrill Lynch advisors can work with whomever they choose, but they don't get paid for helping clients with less than $100,000 in assets. "The $100,000 minimum is high, but it's necessary to help Merrill Lynch focus on where it wants to be," Schmitt says. "Now [lower-net-worth customers] can go to a branch and meet with people face-to-face if they want to."
The high-end advisor/lower-net-worth call center model isn't new to Merrill Lynch, which introduced it in 2000, but it's novel in the bank-brokerage world, which has struggled to find ways to profitably service lower-net-worth clients through a traditional advisory model.
Evidence suggests that the bank may have come up with the answer through its continuation of Merrill Lynch's client service strategy. A 2004 Harvard Business School study cited in Schmitt's report says that sub-$100,000 clients handed off to the call center by their advisors were happier working with what was then called the Financial Advisory Center because they got more time and attention than they were getting from an advisor who wasn't making much money working with them. "Merrill Lynch's financial advisors didn't have the time, but with someone who could focus on them, it turned out to be better for client retention," Schmitt says.
However, she concedes, clients who were used to working one-on-one with an advisor weren't necessary pleased about being shunted to a call center, and neither were their advisors, some of whom have been resistant to the change. "The firm's concern about the cost of servicing clients is not shared by financial advisors," she wrote in the section of the report dealing with challenges Merrill Lynch's model faces. "Many financial advisors would likely prefer to retain these emerging affluent clients in the hopes that they would grow their assets."
The bank is trying to address the potential problem of angering advisors by nominally compensating them for referring less wealthy clients to the call center. But "most advisors realize that most of their clients have self-directed accounts, and if they can bring those in-house they may end up managing those assets in the future," Schmitt says. "The referral fee [to the call center] is small, but what motivates advisors is that they can get that client back."