Merrill Lynch enters the robo-advisory business

Fees are higher than some competitors, but firm already has brand awareness to make inroads into the market

Oct 5, 2016 @ 12:43 pm

By Grete Suarez

+ Zoom

The race among big banks to take a bite out of the robo-advisory pie continues, with the latest contender, Bank of America Merrill Lynch, announcing its own Merrill Edge robo-adviser that is expected to launch early next year.

Merrill Edge Guided Investing will combine an online brokerage platform with Merrill's human advisers in an online format and an app to offer automated investment advice based on customer risk tolerance and needs.

"Their entrance into the space isn't surprising. We've long expected all of the incumbents to enter into the space that we created when we launched Betterment,” said Jon Stein, CEO and founder of Betterment.

Customers will be able to choose from a list of stocks, ETFs and mutual funds that are evaluated by a Merrill Lynch investment team — meaning humans — rather than by a computer, according to a statement. A spokeswoman for Bank of America confirmed that the chief investment officer, Christopher Hyzy, and his staff will be behind the selection of 10 ETF portfolios the robo-adviser will draw from.

Merrill Edge Guided Investing charges an annual fee of 0.45% on the managed assets. This does not include the fees charged on underlying funds in the portfolio. This is higher than peers such as Fidelity Go that charges an annual fee of 0.35%, and Schwab Intelligent Portfolio which only charges fees on its underlying funds.

The fee is also higher than established startups such as Betterment, which charges a 0.35% annual fee on balances under $10,000 (but requires a constant deposit of $100 each month) with no trade fee, and Wealthfront, which charges a 0.25% annual fee on balances over $10,000.

(More: Too many robos crowding the market?)

Lex Sokolin, global director of fintech strategy at Autonomous, said branding awareness will be Merrill Lynch's competitive edge. He said that venture capital firms have invested heavily in building brands in this space, whereas Bank of America Merrill Lynch can potentially reach their customer by advertising at their ATMs.

"I will expect them to use the full weight of the firm to reach and educate the consumer," he said.

"At the end of the day, fees won't matter that much," said Mr. Sokolin. "I don't believe consumers are so price sensitive. I think it's already really hard to get somebody to know that you really exist, so Bank of America's robo will definitely be on top."

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

The client of the future

Your clients of tomorrow want you to stay ahead of the curve with technology. Some of the industry’s top young advisers and thought leaders explain what they think tomorrow’s clients will need.

Latest news & opinion

CAPTRUST acquires $19B RIA in its sixth deal this year

With $243 billion in assets, CAPTRUST continues to grow on its own terms.

Fiduciary advocates press CFP Board for specifics on standards changes

Meanwhile, few brokerages and their trade associations, which blasted the DOL's fiduciary rule in comment letters, are responding to the CFP Board's proposal.

Big gains attract new money to emerging markets, but should investors stay?

An estimated $6.7 billion has flowed into emerging-market stock funds and ETFs so far this year, according to Morningstar.

Attorney blasts Finra after regulator loses insider trading case

Lawyer says it was 'slimy' of Finra to publicize the case while it was still being litigated.

Will Jeffrey Gundlach's Trump-like approach on Twitter work in financial services?

The DoubleLine CEO's attacks on Wall Street Journal reporters is igniting a discussion on what's fair game on social media.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print