February 25, 2011 / 4:06 PM / 8 years ago

Exclusive: BofA to harvest retirement assets through Merrill

CHARLOTTE, North Carolina (Reuters) - Bank of America Corp.(BAC.N) is no Fidelity Investments when it comes to retirement accounts, but it boosted retirement assets under management by nearly 10 percent last year and is gunning for more by guiding bank depositors to Merrill Lynch advisers and its new online brokerage channel.

BofA managed $535 billion in corporate and individual retirement accounts and pension plans at the end of 2010, up from $489 billion 12 months earlier.

Like many wealth management giants, the bank wants to corral the nest eggs of aging Baby Boomers in an otherwise sluggish economy and has made retirement one of its few domestic growth priorities in 2011.

“We think we’re just scratching the surface,” said Andy Sieg, head of retirement and philanthropic services at the bank’s Merrill Lynch unit.

Sieg was recruited from Citigroup in 2009 by Sallie Krawcheck, president of Bank of America’s global wealth and investment management division and his former boss when she was chief executive of Citi’s Smith Barney division.

BofA has far to go to catch up with companies such as Fidelity, which had $857 billion of retirement assets from individuals and institutions as of September 30, 2010.

HUNTING FOR MARKET SHARE

Profit margins from managing retirement plans also are lower than in other areas of the bank. But with Baby Boomers retiring at a rate of roughly 10,000 per day, banks are finding the consistent revenue attractive.

“The banks have been in preparation for this for the last 10 years,” said Marty Mosby, a banking industry analyst at Guggenheim Securities LLC.

It will take many more years to sort out whether banks, after decades of only fitful progress in cross-marketing among their various business units, will be successful in the retirement space, Mosby said.

Few analysts, however, dispute the logic of prospecting for retirement wealth.

Retirement assets are expected to surge to an estimated $20 trillion in 2015 from $15 trillion in 2010, according to research firm Cerulli Associates.

Not surprisingly, competition for those assets is heating up.

This year alone, $184 billion will move among retirement plan providers, according to Cerulli, as banks and fund managers accelerate marketing campaigns to corporations and individuals.

Nevertheless, retirement assets rank among commercial banks’ most stable revenue bases, fueling the kind of consistent earnings banks crave but have rarely posted since the financial crisis began in 2008.

THE REFERRAL PLAN

To more than nip at the heels of the retirement giants, BofA plans to move beyond the corporate retirement plans that added $17 billion of new benefit plan assets to its management coffers last year to capture the 401(k) and small-business retirement accounts of clients at its bank branches.

Sieg says his wealth management unit gleaned about $3.6 billion of new corporate retirement money last year through referrals from the global commercial bank, an indication of the cross-marketing prowess BofA trumpeted when it took over Merrill in January 2009. In 2009, only $700 million came through referrals, according to Sieg.

“The challenge for us is how do we take the success we’ve had in working with the commercial bank and do that in small business and the consumer bank,” Sieg said.

BofA is not alone in plotting such a strategy, of course.

“We’re always talking about the Big R,” Michael Falcon, head of retirement at JPMorgan Chase’s(JPM.N)J.P. Morgan Asset Management said, referring to the rich vein of assets in Morgan’s retail branches. About 40 percent of the bank’s depositors are over the age of 60, he said.

Courting small-business retirement plans also could provide leads to Merrill Lynch’s brokerage force.

“That could multiply contacts and referrals, because you’re getting in front of a lot of high net worth individuals who run these businesses,” said Sophie Schmitt, senior wealth management analyst at Aite Group, a financial services consulting firm.

TRAINING BROKERS

Not all brokers, of course, are eager to play the retirement market. Most have spent their careers helping clients accumulate assets and are wary of advising them on ways to judiciously draw down money in their golden years,

Sieg has instituted a program to train Merrill advisers as chartered retirement planning counselors, a certification offered through the College for Financial Planning and one of many that the wealth management industry has spawned to bestow credibility on advisers.

Out of Merrill’s approximately 15,000 brokers roughly 3,400 had received the designation as of the end of 2010.

Another key part of the plan to capture individuals’ retirement accounts sits with Merrill Edge, the online brokerage service launched last June to amass assets from consumer banking clients who escape the notice of most Merrill brokers.

Edge is primarily targeted at people with fewer than $250,000 in investable assets, including a big group of depositors who are likely to take their 401(k) and other savings plan payouts to other money managers when they retire, Sieg said.

Reporting by Joe Rauch, editing by Jed Horowitz

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