Bank of America Corp (NYSE:BAC) is well-positioned with its size and platform to tap the opportunities for wealth management in the U.S.
Mosche Orenbuch and Jill Glaser Shea of Credit Suisse Group AG (NYSE:CS) point out Bank of America Corp (NYSE:BAC) is also leveraging the reach of its 5k branch locations.
Positive tone from management
Bank of America’s John Thiel, Head of U.S. Wealth Management and the Private Banking and Investment Group, Merrill Lynch Global Wealth Management and Andy Sieg, Head of Global Wealth and Retirement Solutions were present at the 2014 Credit Suisse Financial Services Forum.
The Credit Suisse Group AG (NYSE:CS) analysts point out that during the forum, Bank of America’s management struck a positive tone about the opportunities for wealth management in the U.S. With its size and platform, the bank is well positioned to maintain client assets, strengthen existing relationships and acquire new clients. The bank’s management also considers its platform and capabilities as an advantage.
Significantly, the analysts point out while Bank of America has had the capacity to make investments in the business, its peers may not have. For instance, it has been investing $100 million multi-year in its advisory platform Merrill Lynch One (ML One). Encouraged by its receptivity, the bank is set to sunset the old platform and on-board all employees onto ML One by 2015.
With its best-in-class platform with industry-leading breadth of products, solutions and capabilities, the bank has several competitive advantages. Bank of America Corp (NYSE:BAC) can also leverage from tremendous cross-sell opportunities to deliver wealth management solutions to clients across the franchise.
The bank can also tap the benefits from the diversity of revenue mix and recurring fee-based income.
Product positioning for its $2.4 trillion client base
The Credit Suisse analysts point out that Bank of America has began dissecting its $2.4 trillion of client balances over the past 3 years and has been tailoring products and capabilities based on wealth management client segment.
Merrill Lynch Wealth Management has a clear go-to-market approach around client needs. The analysts note the management is focused on growing fee-based and banking revenues that represented 72% of total revenue in 2013.
Substantial revenue per advisor
The Credit Suisse Group AG (NYSE:CS) analysts point out MLWM has significant productivity advantage as it is near the top of the industry in terms of revenue per advisor.
Though the bank generated a pre-tax margin of 26.4% in 2013 from GWIM, its management believes a 30% pre-tax margin is achievable for the business in a more normalized interest rate environment.
The analysts also point out that the company is leveraging the reach of its 5k branch locations. By aligning 2k FA’s into the mass affluent or core Merrill Lynch business to address the wealth management needs of customers in the branch, the company is set to seamlessly move them to complex relationships.