Bank of America CEO Sees Major Growth in U.S. Wealth Market
Bank of America is intensifying its focus on the U.S. wealth market, unveiling ambitious plans for growth. The banking giant, ranked 17th on the Fortune 500 list, held its first investment day since 2011 on November 5 in Boston. During this event, executives announced several key objectives for their wealth management division.
Growth Projections for Wealth Management
Bank of America aims for a net new asset growth of 4% to 5% in its Merrill Wealth Management unit over the next three to five years. The bank is also targeting revenue growth that is almost double the rate of expenses. Additionally, they are raising the target return on allocated capital to 30% across the entire wealth management segment.
Opportunities in the Wealth Sector
CEO Brian Moynihan highlighted the significant opportunity present in the U.S. wealth sector. The country has over 20 million millionaires compared to about 6 million in China. Moynihan pointed out that the U.S. is on the brink of “The Great Wealth Transfer,” where an estimated $84 trillion to $124 trillion is expected to change hands from Baby Boomers to heirs and charities by the mid-2040s.
As the wealth-management landscape evolves, Bank of America, along with competitors like JPMorgan Chase and Citigroup, is striving to attract Millennials, Gen Z, and ultra-high-net-worth families. These demographics are increasingly interested in values-based investing and digital financial tools.
Strategic Initiatives and Market Share
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, “Our national footprint covers 90% of the wealth opportunity.” The bank is reallocating resources to capture a greater share of this expanding market.
- Advisor Force: The wealth management unit employs approximately 15,000 advisors.
- Recruitment: Attracting new advisors is a priority for organic growth.
- Training: The advisor development program is comparable in scale to leading firms in the industry.
Utilizing Technology in Wealth Management
Moynihan emphasized that leveraging advanced technologies like AI can enhance talent acquisition and client engagement. With AI, advisors can better connect with clients through programs like Merrill’s Advisor Match, which improves the accuracy of client-advisor matching.
Financial Performance Expectations
Looking ahead, Bank of America has raised its medium-term target for return on tangible common equity (ROTCE) to 16%–18% over the next three to five years, an increase from previous estimates in the mid-teens range. The bank reported a ROTCE of 15.4% in the third quarter, compared to 20% from JPMorgan.
Christopher McGratty, an analyst at KBW, has provided an upbeat outlook for Bank of America, reiterating an “outperform” rating for the bank. His endorsement aligns with the bank’s new ROTCE targets, reflecting confidence in Bank of America’s strategic direction and growth potential in the competitive wealth market.
