Merrill Lynch's main broker force shrank during the second quarter, even as Bank of America on Wednesday trumpeted a steady rise in its overall financial adviser count.
Merrill said on Wednesday that it continued to add to its team of more than 17,500 financial advisers during the second quarter of 2012, in a press release announcing its latest earnings.
But a look at the fine print of the company's financial documents shows that the number of full-service Merrill brokers - those that generate the bulk of the revenue for Merrill Lynch's wealth management unit - actually fell during the second quarter.
Bank of America includes associates from its online brokerage Merrill Edge in its financial adviser count. But the actual broker force was 16,151 at the end of June, down by 24 from 16,175 at the end of the first quarter.
That small decline is a sharp contrast to a year ago, when Merrill had expanded its broker ranks by 444 during the same three-month period in 2011.
"You have to show that your business is still growing when the rules and laws of big numbers are really against them," said New York-based financial services recruiter Danny Sarch. "You essentially have a shrinking pool of people that everyone is competing for."
Sarch said that Merrill Lynch has been hit the hardest this year with veteran adviser defections.
The latest earnings report also marks the first three-month period to see a decrease in broker headcount since Bank of America started providing a breakdown for those in Merrill Edge.
The downsizing of Merrill's key adviser ranks is the latest sign of the brokerage's dwindling force, which saw some significant defections in the first half of the year.
At least 110 veteran Merrill brokers who managed more than $21 billion in client assets have left the firm since the start of the year, based on adviser moves tracked by Reuters. During the second quarter alone, 39 advisers who managed more than $7 billion in client assets departed.
The decreased ranks come even as the firm aggressively hires rookie advisers - which add to its broker headcount but do little to replace big pools of client assets lost.
In a footnote on page 33 of a financial supplement packet, the company disclosed that the total count of financial advisers includes 1,383 in its "Consumer & Business Banking segment," referring to Merrill Edge.
Associates in the Merrill Edge program, launched two years ago, are primarily based in bank branches and call centers targeting a less affluent, mass market audience with between $50,000 to $250,000 in investable assets - not wealthy enough to afford the personal attention of one of Merrill's traditional full-service brokers.
Merrill brokers, however, are the primary revenue generators for the firm. Nearly 46 percent of the revenue received by Merrill Lynch's Global Wealth Management unit last year, for example, came from just 21 percent of its top-producing brokers, about 2,500 people, according to copies of internal reports reviewed by Reuters in May.
Bank of America purchased Merrill Lynch in 2009, acquiring its brokerage force of reputable Wall Street advisers that have been a stronghold for the bank over the past few years. Top brokers are a boon for the firm as they can sell the bank's products to their large client bases.
When subtracting out Merrill Edge associates, broker headcount rose by 10 during the first quarter this year, by 103 during the fourth quarter 2011, by 415 during the third quarter 2011, and by 444 during the second quarter 2011 from preceding quarters.
While Merrill had 504 more brokers from its headcount at the end of June last year, adviser productivity fell by roughly 5 percent over that same period to an average productivity of $915,000 from $965,000 last year, in terms of annualized revenue.
Revenue as a whole for Merrill Lynch was down 3.5 percent at $3.64 billion from last year, on the back of a low rate environment, the company said.
The decrease in adviser productivity from last year also hints at strains from the addition of many rookie advisers who have been added to replenish Merrill's broker force. It can take trainees 10 to 20 years to amass $100 million in client assets, the size of a veteran broker's books of business. (Reporting by Ashley Lau; Editing by Walden Siew, Bernard Orr)