It’s a bank, it’s a broker and it’s all at an ATM

Glass-Steagall may have gone the way of the Berlin Wall, but true integration of banking and brokerage has taken a lot longer to achieve than German reunification

Glass-Steagall may have gone the way of the Berlin Wall, but true integration of banking and brokerage has taken a lot longer to achieve than German reunification.

News from Bank of America Corp. signals that that integration day finally may have arrived.

Enhancements to Merrill Edge, launched in June by Bank of America Global Wealth & Investment Management as a self-directed option intended to compete with offerings from Charles Schwab & Co. Inc. and Fidelity Investments, provides true aggregation of customers’ banking and investment accounts.

At long last, Bank of America customers are able to view their banking accounts and their Merrill Lynch investment accounts online and at BofA’s 18,000 ATMs.

Although it is easy to ask what took so long, it is clear that integrating self-directed accounts at Banc of America Investment Services Inc. with accounts at Merrill Lynch Direct and the Merrill Lynch Financial Advisory Center to create Merrill Edge wasn’t quite as simple as keying in your PIN.

Step one, which took place in August and September, involved transferring about 1.2 million legacy Banc of America Investment Services brokerage accounts, valued at $127 billion, from National Financial Services LLC to Merrill Lynch.

According to BofA spokeswoman Selena Morris, the conversion involved 2 million hours of coding and completion of more than 400,000 testing scenarios. It already has increased efficiency and saved about $100 million in operating costs.

“Technologically, we have attached Merrill Lynch to Bank of America — clients and advisers can see the full array of services available, for example, and [customers] can use any of our ATMs to see everything from Bank of America accounts to mortgage to investment accounts,” said Dean Athanasia, an executive with the Bank of America Mass Affluent and Small Business group.

The platform gives the company the ability to offer financial advice and solutions to its target market — mass-affluent investors, which the company defines as those having between $50,000 and $250,000 in investible assets — at all stages of their lives.

“This mass-affluent sector is large and attractive, and clearly, this sort of service integration was considered as part of the Merrill/Bank of America merger,” said Eric Daugherty, director of research and a principal with research firm kasina LLC. “Anything that simplifies reporting for consumers is a good thing.”

BofA initially is making the system available to new clients in a pilot phase. The remaining 11 million or so BofA customers who meet the minimums (out of 57 million total customer and small-business relationships) will get access this year.

If they have the desired assets, BofA’s banking customers will have access to a self-directed-investing account or an account with an adviser through the Merrill Edge Advisory Center. Those selecting the latter have access to 600 advisers.

Either solution provides a comprehensive account view online, giving customers access to balances in Merrill Lynch 401(k) and brokerage accounts, as well as access to checking, savings and credit card accounts from BofA.

To sweeten the pot and encourage adoption, BofA has introduced a Platinum Privileges program that packages higher levels of service and rewards for those maintaining $50,000 or more in deposit accounts with BofA or investment balances with Merrill Lynch.

From a branding and service perspective, Merrill Edge would seem to make the combined Merrill/BofA an integrated organization in the eyes of its clients, potentially paving the way for better cross-selling opportunities, said Mr. Daugherty, who hasn’t seen the platform.

Analyst Sophie Schmitt of the independent research firm Aite Group LLC, who is completing an in-depth report about how banks are going after the mass-affluent market, said that the platform represents more of a customer retention play than an acquisition play.

“The thinking among banks these days is the more assets retained, the better,” she said.

According to Ms. Schmitt, efforts by BofA to cross-sell to the mass-affluent market are far greater than those of rivals Citigroup Inc. or Wells Fargo & Co. “[BofA] is still the only bank out there with a multichannel bank brokerage integrated offering — the execution of it and customer adoption are something else entirely, and only more time will tell,” she said.

Several Merrill Lynch financial advisers, who said that they couldn’t speak on the record without corporate approval, expressed their fear that the new system represents competition.

Not so, according to Ms. Morris.

“Merrill Edge is designed to complement our current offerings, providing products and services that create opportunities for our advisory business and stimulate new demand for Merrill Lynch services by the next generation of affluent individuals. As clients’ needs evolve and become more complex, Merrill Edge will help interested clients connect with financial advisers,” Ms. Morris wrote in an e-mail.

Visit our blog (InvestmentNews.com/technology) for details on the investment services that will be available on the self-directed platform, as well as insights from others that couldn’t be included here due to space constraints.
E-mail Davis D. Janowski at [email protected].