Merrill Robo Debuts as Pressure for Broker Referrals Dissipates
Bank of America on Wednesday formally launched the low-cost automated investing platform of exchange-traded funds that was developed in part to attract Merrill Lynch wealth management customers unhappy with the firm’s new retirement account policies.
Merrill Edge Guided Investing, a managed account “robo” platform that charges a 0.45% annual fee on accounts with as little as $5,000, operates independently of brokers and private bankers at the bank’s Edge, Merrill Lynch and U.S. Trust businesses. The platform went live in late January for customers of the bank’s Merrill Edge discount brokerage unit, but on Wednesday implemented what it called its “nationwide launch.”
When BofA announced plans for the robo last October, Merrill officials and brokers said it could be a refuge for full-service wealth management clients who objected to the firm’s decision to close their commission-based retirement accounts and move their assets to its fee-based Merrill One managed account platform, which charges most clients at least 1% of those assets.
Since the Trump administration last Friday ordered a review of the Department of Labor fiduciary rule that provoked Merrill’s controversial restrictions on mutual funds and commission accounts, the pressure to move clients may ease, some brokers said.
Merrill Lynch brokerage officials are sending mixed signals on whether they are easing some of those fiduciary rule restrictions that have differentiated it from rivals. Andy Sieg, who in January took over as head of the more than 14,000 advisors in Merrill’s Thundering Herd, said in an internal memo last week that “we may need to adjust the timelines for certain operational changes we have announced to ensure an orderly transition and a good client experience,” depending on how the Trump administration proceeds.
Meanwhile, Merrill continues to abide by a new policy requiring brokers to make at least two referrals to another part of the bank in order to avoid a yearend hit to their compensation. Merrill also does not pay its advisors on any household accounts with less than $250,000 of assets, giving brokers another incentive to shuffle lower-end clients to Merrill Edge “Financial Solution Advisors” or the automated robo platform.
Bank officials declined to discuss how many people have enrolled in the Financial Solutions Advisor robo program since its soft start on January 28 nor on how many referrals are coming from wealth management advisors and U.S. Trust private bankers.
In announcing the robo platform, the bank made a nod to its full-service advisors. “Merrill Edge Guided Investing can also complement a client’s existing Merrill Edge, Merrill Lynch or U.S. Trust relationship,” it said in a news release. “Existing Merrill Lynch and U.S. Trust clients are encouraged to contact their advisor to see how the platform fits with their current strategy.”
The news release did not address how such a robo-supplemented relationship could affect customers’ costs and brokers’ compensation.