Bank of America doubling down on Merrill Edge

Hiring almost twice its current workforce of 1,700 to serve clients with less than $250,000 in investible assets

Sep 4, 2014 @ 12:52 pm

By Mason Braswell

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Bank of America intends by 2016 to almost double its head count of around 1,700 Merrill Edge advisers, a workforce that serves clients with more modest assets who are not being served by traditional advisers.

By beefing up its effort to capture more of the so-called mass-affluent market, Merrill Lynch could present more competition to robo-advisers that offer online advice, as well as more established low-cost players such as the Charles Schwab Corp. and Fidelity Investments.

Merrill Lynch first disclosed its intention to strengthen its Merrill Edge workforce, which works with clients who don't meet the $250,000 minimum of investible assets for a full-time Merrill Lynch adviser, in a memo that first appeared on the web site Advisor Hub Inc. last week. The contents of the memo were confirmed by Bank of America spokeswoman Anne Pace.

Although it shares the Merrill Lynch name and reports head count alongside Merrill Lynch's approximately 13,700 advisers, the unit, which was founded after the 2008 merger with Bank of America, is part of the consumer business and banking segment. It provides retail clients with access to Merrill Lynch managed-account platforms in addition to providing a trading platform for direct investors. There are around $106 billion client assets with Merrill Edge, according to the memo.

The unit, and those like it at Wells Fargo Advisors and UBS Wealth Management Americas, indicate that competition in the mass-affluent market could be heating up.

“Merrill Edge is getting to a maturity level where they can take the other firms head on,” said Alois Pirker, a research director at Aite Group, a consulting firm. “They've built up the platform and the number of financial advisers and the training process and built up the whole mechanics between the branches and online.”

The large retail branch network at Bank of America provides an untapped client base for Merrill Edge that could give it a leg up over competitors, Mr. Pirker said.

Similar to Merrill Edge, Charles Schwab has its own network of around 300 branch offices where advisers can provide basic guidance, help set up a self-directed account or refer clients to affiliated registered investment advisers.

A Schwab spokesman, Rob Farmer, declined to comment.

A stronger Merrill Edge also gives the firm a way to compete with low-cost online advice platforms, such as Wealthfront or Personal Capital, which use algorithms to determine appropriate investments for clients and have become a closely watched alternative for the next generation of investors, Mr. Pirker said. Personal Capital also offers guidance from online advisers.

Merrill Edge offers managed portfolios with a $20,000 minimum. It includes a twice-yearly account review with a financial solutions adviser.

Wells Fargo & Co., which has around 250 advisers who consult with self-directed clients on its WellsTrade platform, focused a portion of its largest technology investment in almost 10 years on updating that service. It also created a new position for a digital chief, Devon McConnell, who reports directly to the firm's president, Mary Mack, and will be in charge of the WellsTrade project.

“Traditionally, I would categorize WellsTrade as having been a platform for people who are self-directed,” said Brand Meyer, who currently oversees the online platform in addition to Wells Fargo's independent brokerage group, FiNet. “The work that is being done is to take WellsTrade and expand it, so that it will be more helpful from an educational standpoint and … finding the most appropriate type of investment.”

UBS Wealth Management Americas has its Wealth Advice Center, which has 90 advisers who focus on budgeting and planning needs that may be more relevant to mass-affluent clients. The advisers provide a free financial plan, for example, but do not include regular portfolio reviews or access to more complicated products, such as options and futures, for all clients, according to disclosures on its website.

A Morgan Stanley spokeswoman, Christine Jockle, said the firm has a call center for clients to access a Series 7 licensed adviser.

Timothy Welsh, an industry consultant and president of Nexus Strategy, warned that the biggest challenge that Merrill Lynch and other wirehouses will face is branding. Having multiple platforms targeting different audiences on the same name could “mix their messages,” he said.

“It's like the car companies where Toyota came in at the low end of the market and moved up when they came up with Lexus,” Mr. Welsh said. “But Mercedes Benz cannot go down market with an economy car; their brand just doesn't allow it.”

Mr. Welsh, who worked as a broker at Merrill Lynch from 1992 to 1999 and for Charles Schwab, also warned that Merrill Edge irks some long-time Merrill Lynch advisers who see the service as blurring the lines between the bank and brokerage.

“No one wants to see 'Mother Merrill' relegated behind Bank of America logos,” he said. “They could also cause their own brand damages by disenfranchising the large brokerage force.”

The Merrill Edge advisers operate differently than a traditional Merrill Lynch broker and are paid on a salary and bonus structure, as opposed to their salary's depending on the fees and commissions they charge.

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