Merrill Lynch ‘goals-based’ accounts to reach $200 billion milestone

Merrill Lynch expects its revamped fee-based investments platform to pass $200 billion in assets by next week, notching a milestone in its massive platform overhaul.

Merrill Lynch Wealth Management expects its revamped fee-based investments platform to pass $200 billion in assets by next week, notching a milestone in its massive platform overhaul.

Merrill Lynch has pitched the overhaul of the technology underpinning its managed accounts program as part of its plan to bolster “goals-based wealth management,” the core of a several-year strategic plan laid out by the company’s leadership. On Wednesday, a spokesman confirmed the asset growth forecast.

Assets on Merrill Lynch One, as the platform is called, include about a third of those formerly held in the five legacy managed-accounts programs at the firm. Merrill Lynch officials said the new program is also being used by 91% of advisers who bill on fee-based business.

The overhaul, which began in branches late last year, could vastly simplify the disclosure of fees and streamline the firm’s byzantine menu of products.

It could also recast the wirehouse – increasingly in competition for assets with unaffiliated advisers who promote themselves as delivering a higher standard of care to clients – for an era in which advisers are increasingly relying on financial planning to deepen client relationships and inform investment selections, according to the Aite Group, a Boston-based consultancy that studied the platform.

“Traditional firms experienced a decline in market share starting in 2008, to the benefit of firms that follow a fiduciary duty of care,” according to Aite’s report, titled “Merrill Lynch One: Paving the Road to Goals-Based Wealth Management.”

“Wealth management firms that will lead in this new fiduciary era are those that will make the fee-based account the central investment offer, and those able to give clients continual insight into how well they are achieving their goals,” the report said.

A spokesman for Boston-based Aite said its report was not sponsored by Merrill Lynch.

Merrill One combines an array of legacy systems, including its unified managed accounts, mutual fund advisory and rep-as-portfolio-manager programs. Advisers can no longer open new accounts on the legacy platform, and have until the end of next year to move existing accounts, according to John Quinn, who directs platform development at Merrill Lynch.
“Merrill One has been a great opportunity for our advisers to assess many aspects of their business model as they transition to the new platform,” said Mr. Quinn. “It makes it simpler to express the thought leadership of the firm in the way they build portfolios … That capability is much more difficult on a siloed platform.”

A process of opening two managed accounts for one client once took 80 clicks of a computer mouse, two contracts with clients and disclosure brochures totaling up to 300 pages, according to Merrill Lynch. The firm said it now takes just 40 clicks and requires 64 pages of contracts and disclosures.

Merrill Lynch spent around $100 million on the upgrade during a three-year period beginning in 2010, said spokesman Matthew Card.

Merrill says that one in four dollars it brings onto the platform are new fee-based assets coming from new or existing clients. Mr. Quinn denied reports that some clients were switched into higher-priced programs as part of the switch.

The division that houses Merrill Lynch’s 14,000 advisers reported $888 billion in advisory assets as of Sept. 30, along with more than $1 trillion in brokerage assets.
Frank L. Campanale, who, as an executive at the now-defunct E.F. Hutton and Smith Barney brokerages helped to develop some of the first managed account platforms, said the industry has been moving toward increasing use of technology platforms that combine multiple types of accounts and put the adviser in the driver’s seat.

“The utility makes the adviser, clearly, the orchestra leader because the success or failure in that client’s view doesn’t depend on whether there’s a separate account manager or an ETF, it depends on how well that adviser orchestrates the combination of those investments into an executable strategy,” said Mr. Campanale.

But wirehouses face difficulty in adopting such platforms because of their expense and the need to deploy technology across massive field broker operations, he said.

Mr. Campanale is now chairman and chief executive of Lebenthal Wealth Advisors, a New York-based independent firm that competes for clients with wirehouses, including Merrill Lynch.

Merrill’s other goals-based planning initiatives include Merrill Lynch Clear, a glossy set of retirement-planning technology tools; a client questionnaire called the Investment Personality Assessment; and Wealth Outlook, a probability-modeling planning tool.