Bank of America Targets Growth in Wealth Management Sector

Bank of America is significantly increasing its focus on the wealth and investment management sector, with CEO Brian Moynihan highlighting a substantial opportunity within the U.S. market. The bank aims for a net new asset growth rate of four to five percent in its Merrill Wealth Management division over the next three to five years.

They also target revenue growth that is nearly double the rate of expenses, alongside a goal for return on allocated capital to rise to thirty percent for the wealth management segment. Moynihan noted that the U.S. is home to over twenty million millionaires, in comparison to around six million in China, positioning the U.S. as a key market for wealth management services.

The imminent Great Wealth Transfer, expected to transfer between eighty-four trillion to one hundred twenty-four trillion dollars from Baby Boomers to heirs and charities by the mid-2040s, is a pivotal factor driving this strategic focus.

Bank of America, alongside competitors like JPMorgan Chase and Citigroup, is expanding its wealth management operations to attract Millennials, Gen Z, and ultra-high-net-worth families, particularly those interested in values-based investing and advanced digital tools.

Currently, Bank of America claims a fourteen percent market share within the ultra-high-net-worth segment, with President of Bank of America Private Bank, Katy Knox, stating that their national footprint covers ninety percent of the wealth opportunity.

The bank is heavily investing in its advisor base, boasting a combined force of about fifteen thousand advisors. Recruitment and training are fundamental to this growth strategy, as emphasized by co-president of Merrill Wealth Management, Lindsay Hans.

She stated that the advisor development program is substantial and aims to equip new hires with essential and advanced skills. Moreover, advancements in technology such as artificial intelligence are expected to enhance talent acquisition, making the firm more attractive to young professionals.

The report mentions that advisors spend considerable time on client development and relationship building, particularly early in their careers. Moynihan pointed out that AI tools, like the Advisor Match program, streamline the connection between clients and advisors, thereby enhancing the efficiency of the matching process.

Bank of America has also raised its medium-term target for return on tangible common equity to sixteen to eighteen percent over the next three to five years, an increase from its previous mid-teens guidance.

The bank's return on tangible common equity grew to fifteen point four percent in the third quarter, though still trailing JPMorgan's twenty percent. Analyst Christopher McGratty from KBW has reiterated an outperform rating on Bank of America, indicating that the bank's new ROTCE target aligns with market expectations.