Merrill adds Zelle to wealth management app to let clients make payments

But advisers say they don't see using apps like Zelle or Venmo to collect client fees

Jun 26, 2018 @ 2:20 pm

By Ryan W. Neal

Merrill Lynch is updating its mobile app with some modern features that are increasingly popular among consumers.

Clients can now scan and send documents to their Merrill Lynch adviser using their smartphone camera, view activity in their Bank of America banking accounts, use new spending and budgeting tools, and make real-time money transfers using Zelle, a peer-to-peer payment service that is now integrated directly into Merrill's app.

(More: Meeting clients' high-tech expectations)

Zelle, like similar apps from Venmo and PayPal, lets users send money to anyone who has access to the app using just a phone number, email address or username. They're designed for sending rent money to a roommate, splitting up a bar tab, paying back a friend for concert tickets and other day-to-day expenses.

Such services are increasingly popular among millennials, with some expecting that 91 million people will use the apps to send more than $187 billion by 2019.

(More: Millennials design the financial service that would get them to invest)

Although Zelle has been rolled out on the Merrill Lynch app, the Zelle integration will not be a way that Merrill's advisers collect fees or move money into brokerage accounts, said Kabir Sethi, head of digital wealth management at Bank of America.

Nor do such payment apps seem to be catching on among the financial planners who charge a flat fee for their services, even those who focus on younger investors. Though apps like Venmo and Zelle theoretically could work, Alan Moore, co-founder of the XY Planning Network, said they just aren't designed with the needs of financial planners in mind.

The payment apps don't allow for recurring payments, or the addition of a bookkeeper or multiple advisers to the system, and they lack the workflows that financial advisers need, Mr. Moore said.

Doug Oosterhart, the founder of Lifepoint Planning and a member of the XY Planning Network, pointed to the message that using one of these apps would send about a professional financial planning firm.

"Client perception is huge, so they feel reassured that they're using a secure and compliant service versus sending money via Venmo, which may be considered less professional," Mr. Oosterhart said.

However, advisers are turning towards digital tools to collect payments from clients. Mr. Moore said that nearly 500 XYPN financial planners use the network's own payment tool, AdvicePay, to collect financial planning fees that aren't tied to managing assets.

"I've got nothing but good feedback from clients in their 30s all the way into their mid-70s saying how easy using AdvicePay is," Mr. Oosterhart said.

The app allows financial planners to collect their fees without worrying about triggering SEC custody rules by being in possession of personal data such as credit card numbers, since those rules come with stricter regulations and a surprise annual audit.

"They can shut me down for having my customer's information," said Yves-Marc Courtines, principal of Boundless Advice and another XYPN member.

Even if a financial planner has a customer's information just to enable a recurring payment for financial planning that the customer agrees to, "I'd be a broker-dealer or custodian," he said. "All of us that are RIAs say, 'I don't have custody, I have discretion to trade my client accounts.'"

Other software that business owners can use to charge credit cards, like QuickBooks or Square, often prohibit financial services firms from using them. Mr. Courtines knows at least one adviser who had their client information deleted from QuickBooks.

"In financial services, there's a higher level of fraud and being spammed," he said. "Advisers get lumped into the lines of business that credit card companies don't want to be in. If they process fraud, they get into hot water."

For those who do manage assets, there are technology vendors like Capitect, which can automatically calculate client fees across all accounts and deduct them from a custodian account.

(More: Capitect using technology to deliver 'mass personalization' to portfolios)

For Merrill, which deducts fees from its own brokerage accounts, the new features of its app help position its service as a provider of holistic financial advice rather than a brokerage. Mobile payments and the ability to view Bank of America accounts also further integrate Merrill's wealth management capabilities with the banking business.

(More: Morgan Stanley gives close-up look at new adviser technology suite)

"I think the broad need we're trying to address, which clients want us to help them with, is how can you help me with my entire financial life," Mr. Sethi said. "Clients don't see the different parts of their financial life as totally segregated as much as they see them add up."

But at least for now, the way clients pay their adviser will be different than the way they buy a friend a beer.


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