Merrill to Pause Account Transfers for a Week
An operational change at Merrill Lynch over the next week may create short-term headaches for new recruits, departing brokers and their clients as the broker-dealer temporarily freezes asset transfers.
Starting late on Friday morning, Merrill is freezing the processing of Automated Customer Account Transfer Service requests for a week. ACATS are used industrywide to ensure efficient movement of customer accounts among broker-dealer firms.
The pause comes at a sensitive time for Merrill, which anticipated hiring a surge of experienced brokers this summer before it feels the effect of a cost-saving freeze on recruiting. The difficult task brokers face in changing firms and convincing former customers to follow them could be exacerbated by an ACATS disruption.
Merrill made the operational decision to accommodate modifications that its parent, Bank of America, is making in its “living will.” The will is a that big banks are required to file with regulators every year to facilitate an orderly and rapid unwinding of assets in response to a material financial distress event or failure.
Bank of America is splitting off its institutional brokerage business from its Merrill Lynch Pierce Fenner & Smith broker-dealer that currently overarches its retail and institutional units. To accommodate the change and creation of a new broker-dealer, Merrill Lynch’s retail business must convert to a new identification number assigned by the Depository Trust Company, the central securities depository for U.S. brokerage firms.
The operational switch will delays ACATS for the week. Asset transfer requests will be processed once the transition is completed on the morning of Friday, August 4, officials at Merrill and some other firms said.
The delay could, of course, give Merrill another week of production and asset-based account fees from brokers who were anticipating giving notice over the next week but is more of a nuisance to brokers than a significant deterrence, said some recruiters.
“A five-day falloff doesn’t really mean much if a client has already signed the [transfer] document,” said a third-party recruiter who works with Merrill. “The interesting question will be is the [new broker] going to have two weeks worth of work accumulating.”
Independent broker-dealer LPL Financial warned its 14,300 brokers on Monday that any requests they make for transferring assets from Merrill clients will “pend” during the week. By the same token, new Merrill brokers can put in ACATS requests but may have to warn clients that it will take longer for accounts to move.
Merrill Lynch’s wealth unit will continue to operate under the Merrill Lynch Pierce Fenner & Smith umbrella but its DTC number will change to 0671 from 0161. The institutional securities business will use the old number but is expected to operate under a new broker-dealer name, BofAML Securities Inc., people at the company said.
“This initiative does not impact our business model, our brand, or what we deliver to our clients,” said a Merrill official. “It is simply a change in how our broker-dealer legal entities will be organized and is consistent with many of our peers in the industry.”