Bank of America CEO Eyes Major Growth in U.S. Wealth for Ultra-Rich
Bank of America is strategically enhancing its wealth management services, particularly targeting the affluent segment of the market. The bank’s executives recently presented ambitious objectives during their first investment day in over a decade, held in Boston on November 5.
Growth Aspirations in Wealth Management
CEO Brian Moynihan discussed the significant potential within the U.S. wealth sector, emphasizing that over 20 million millionaires reside in the country. The bank aims for a net asset growth of 4% to 5% in Merrill Wealth Management over the next three to five years. Additionally, the revenue growth is expected to nearly double that of expenses.
- Target return on allocated capital to reach 30% for the segment.
- Emphasizing competition with major banks like JPMorgan Chase and Citigroup.
The Great Wealth Transfer
Moynihan highlighted an upcoming generational shift, termed “The Great Wealth Transfer.” This shift is projected to transfer between $84 trillion to $124 trillion from Baby Boomers to their heirs and charitable organizations by the mid-2040s. Such a transition is anticipated to reshape the financial landscape significantly.
Market Share and Competitive Strategy
Bank of America currently holds a 14% market share in the ultra-high-net-worth segment. Katy Knox, president of Bank of America Private Bank, stated that the bank’s resources would be aligned to capture the growing wealth opportunity, which the bank’s national footprint covers at 90%.
- Investment in advisor recruitment to support organic growth.
- Approximately 15,000 advisors currently employed.
Advisor Development and Technology Integration
Bank of America places a strong focus on training its advisors, with programs designed to develop skills from foundational to advanced levels. The firm leverages technology, including AI, to enhance advisor recruitment and client matching processes. The “Advisor Match” program utilizes AI to connect clients with suitable advisors based on preferences and profiles.
Financial Performance and Future Projections
In its latest quarterly report, Bank of America achieved a return on tangible common equity (ROTCE) growth of 15.4%. The bank has adjusted its medium-term ROTCE target to 16% to 18%, aligning with analysts’ expectations. Christopher McGratty, a KBW analyst, reaffirmed his positive outlook, noting that the new target is fitting given the current market dynamics.
As Bank of America enhances its wealth management capabilities, it positions itself to thrive amid increasing competition in the sector, particularly as it focuses on catering to the ultra-rich clientele.
