How the new leaders of Merrill Lynch's $3.3 trillion wealth business are shaking things up (2024)

Schimpf is more soft-spoken than his cohead Hans, who was promoted to run the private wealth business one month before Sieg left. But while their ascension surprised observers, they were the natural choices to lead the business, he firmly told Business Insider in an interview.

"Lindsay and I have been at this leadership table together for 10 years," Schimpf, wearing cufflinks shaped like the Merrill bull logo, said. "It was our turn. The desires of the business, the needs of the business, the strengths and those things, they weren't foreign to us."

Schimpf, 55, started his career at Merrill in 1994, three days after his last day as a paratrooper in the Army. Forty-four-year-old Hans joined in 2014 from UBS where she oversaw its downtown Los Angeles complex. They had similar roles at Merrill leading different regional divisions with Schimpf overseeing the Pacific Coast and Hans managing the Northeast division before her brief time as private wealth head. They start and end their days together, calling each other in the morning and evening to prep and debrief and messaging throughout the day. Hans shows up earlier to meetings now thanks to Schimpf's military credo that five minutes early is on time and on time is late.

The setup allows them to cover more ground, but they rarely divide and conquer, according to Hans. They are often in New York City together where Hans is based, and Schimpf splits his time between the city and Nevada. The pair take most meetings together and don't split up responsibilities.

"While it may be untraditional in maybe leadership of wealth management firms, it's actually quite common when you think about the financial advisor team model and the value it is to the people that you serve to be able to have different perspectives that ultimately, we think, get the better outcomes," she said.

They work jointly on their four main priorities: adding clients, managing more of existing clients' assets, gaining advisors through training and recruitment, and investing in technology so clients can do more digitally. So far, it seems to be working. Merrill reported $3.3 trillion in client assets, up 13% year over year, this past quarter. Greater asset management fees helped drive revenue, which increased to $4.65 billion, up 5.7% year over year.

Merrill netted 6,500 new clients this quarter, a little less than half what it gained the year before during the regional banking crisis, but 200 up from the prior quarter.

It is unclear how many advisors work at Merrill. Bank of America only reports the combined number of client-facing advisors at both Merrill and the private banking unit, which hovered below 19,000 at the end of 2023. According to InvestmentNews, which tracks advisor exits, Merrill saw a net decline of 445 advisors last year, a drop from 703 in 2022 and 1,043 in 2021. The wealth manager does not report how many advisors leave, but it netted 175 advisors in 2023, and its 4% attrition rate is in line with historical averages, according to Schimpf. Merrill's advisors have a history of tension with executive leadership that dates back to the business's merger with Bank of America during the financial crisis.

When the pair took the reins, they visited some 30 cities to meet with advisors and hear their concerns. They have unwound some policies that had been unpopular with some advisors under Sieg's reign, such as the "growth grid" that penalized compensation for brokers who did not add clients and accounts.

"I think with the new compensation plan, they did a pretty good job of at least messaging it in a way that said, 'Hey, we're listening to your complaints,'" recruiter Louis Diamond told Business Insider in December.

Meeting clients where they are

Clients demand more from their financial advisors since Schimpf started at Merrill three decades ago.

"It wasn't a planning-based industry back then," he said. "You lived and died on investment performance. Could you perform better with an equity portfolio or whatever the need and how many times could you replicate that across how many people?"

Now financial advisors have a broader mandate as clients expect more services like estate tax planning. In order to become a one-stop shop, teams are getting larger, Schimpf said.

Customers also want to be able to make transactions like wire transfers from their phone and on a 24/7 basis. Merrill recently rolled out a new app for banking, investing, and retirement accounts.

Merrill has the benefit of being part of a bank with some 69 million consumer bank clients. Getting even a third of Bank of America clients that have enough wealth to work with Merrill would double the business's size, according to Hans.

This past quarter, Merrill doubled new assets from internal referrals including from Bank of America's consumer bank. Just over half of Merrill clients have an existing banking relationship with Bank of America, and 60% bank or lend with the institution, but there is room for more, according to Schimpf.

Hans and Schimpf have changed how Merrill recruits and trains its talent

Both of Hans and Schimpf's fathers were financial advisors, which helped the co-heads grow comfortable talking about money, but few people have that benefit, Hans said.

Lowering the barrier to entry for younger advisors and more diverse advisors means lowering the bar to entry. Merrill currently has 2,300 trainees in its advisor development program, which has been cut in half from 36 months to 18 months and has trainees use leads rather than cold call, which has been banned.

"When you think about generational diversity, gender diversity, ethnic diversity, it really is the commitment to train people that have never done this before and come in unlicensed," Hans said. "The industry does not have strong demographics when you look at core experienced advisors, and it's lagged behind the pace of growth and diversity in the investing public."

Merrill has had a training program for 70 years, and the wealth manager largely ignored veteran recruiting for five years. It resumed the practice in the fall of 2022 and stepped up its efforts to get top producers this past winter with deals as high as 400% of annual revenue with more than half in upfront cash, trade publication AdvisorHub reported. A Merrill spokesperson confirmed that veteran recruiting had resumed but declined to comment on compensation packages.

While training is still the backbone of Merrill's talent strategy, the wealth manager is interested in pursuing top producers in its existing markets, Hans said. Last week, Merrill recruited a 12-person team from First Republic, by way of JPMorgan, that manages $3.5 billion in assets.

Keeping existing advisors happy is also a big part of the equation. While departures slowed down in 2023, according to InvestmentNews' data, there have been high-profile exits this year. In January alone, four teams managing nearly $9 billion in assets combined left, AdvisorHub reported.

Schimpf said that the top-line attrition numbers are good, but that he and Hans are vigilant about keeping its vast network of advisors, spread across 600 locations in the US, engaged and invested. Leaning on the 100-plus market executives to escalate advisor concerns to him and Hans is a priority. Their goals are now closer aligned to advisor performance.

Another component is continuing to educate existing advisors with, for instance, peer-to-peer sessions and management consulting, on how to grow their businesses while staying at Merrill, said Hans.

"The ones that think about the goal being. 'I want to grow my practice and, in so doing, grow my income,'" she said. "Those are the type of people that we want to work with whether the doors are locked, which we know they're not."