The Financial Times reported BofA Merrill Lynch plans to hire 2,000 brokers over the next 12 months. They will hire inexperienced brokers rather than pay big upfront fees for established professionals. These brokers will market investment products to BofA’s 17 million mass-affluent customers who need wealth management services.
Alois Pirker, research director at Alte Group LLC thought this was a smart strategy, “If you don’t leverage the opportunity, you might as well split (BofA and Merrill) up again.”
I have a different take. BofA has developed a relationship with its customers delivering traditional bank services and not investment services. Now it wants to generate more revenue from these relationships – Mr. Pirker called it “leverage the opportunity.”
Leveraging relationships is good for BofA and bad for its customers when it adds 2,000 newly minted brokers to sell bank, investment, and insurance products. In my opinion, these brokers should come with the following warning label: “I am a brand new broker. I don’t know how to help you achieve your financial goals. But, I have been trained to sell you bank products.” This is not wealth management; this is product sales disguised as wealth management.
This is a common bank strategy. Build trust with traditional bank services and then use the trust to sell investment and insurance products. BofA customers beware. Make sure you ask brokers for documentation that describes their experience and other sources of investment expertise before you buy what they are selling.