BofA Advisory Revenue Rises Amid Fiduciary Change

Move to fee-based retirement from commission-based didn’t slow business.

Reviewed by: Elizabeth Dilts
Edited by: Elizabeth Dilts

(Reuters) New York – Bank of America's wealth business reported revenue climbed 3% to $4.6 billion in the first quarter this year from last year on higher client assets under management and fees, Bank of America Chief Financial Officer Paul Donofrio said Tuesday.

The results come amid the backdrop of the bank's decision to break from its wealth management peers and wind down its commissions-based retirement business and the departure of 145 financial advisors from Merrill Lynch's "thundering herd."

The firm committed to ending its IRA accounts last year in preparation for the U.S. Labor Department's fiduciary rule that takes effect on June 9 and requires firms to eliminate potential conflicts of interest for advisors managing clients’ retirement accounts.

‘Shift Between Active And Passive’

"These solid results were produced in a period of change for the industry as firms and clients anticipate new fiduciary standards and other market dynamics such as the shift between active and passive investing," Donofrio said on a call with analysts.

The bank's Global Wealth and Investment Management division, which includes Merrill Lynch and U.S. Trust, reported long-term assets under management rose to $29.2 billion in the three months ended March 31 from $18.9 billion in the fourth quarter last year.

The unit's pretax profit margin, a key metric that can show growth across business segments, rose to 27% from 26% a year earlier.

Overall, the second-largest U.S. bank's total revenue rose about 7% to $22.45 billion, beating the estimate of $21.61 billion.

Fee-Based Accounts Rise

Last month, Merrill Lynch partly walked back its statement that it would completely end commissions-paying retirement accounts after the fiduciary rule was delayed by 60 days from the original implementation date of April 10.

Nonetheless, the portion of advisors with more than half of their clients enrolled in fee-based accounts, which pay an advisor a flat fee rather than a commission, continued to rise this quarter, up 2% to 66% of advisors compared with the prior quarter.

Brokerage and other noninterest income fell $83 million over last year as the firm moves away from commissions-paying accounts.

Donofrio acknowledged that transactional revenue continued to decline, but said it was offset by higher assets under management and fees.

Merrill Lynch revenue rose 5% to $3.78 billion from the prior quarter on higher asset management fees and net interest income. The firm's total number of advisors fell to 14,484 from 14,629 in the fourth quarter last year.


Elizabeth Dilts is a staff writer for Reuters.