Von Aldo

Merrill’s Revamped Discount Brokerage, Good for Merrill but Bad for FAs?

Registered Rep. August 2010 coverOur cover story for August, Don’t Talk to Chuck: With its revamped discount trading platform, Merrill has, in effect declared open warfare on Chuck Schwab and its discount peers,” is starting to draw feedback. The article has been among our most viewed articles on our website since we posted it two weeks ago. And my phone is ringing.

Apparently, several Merrill FAs believe we were too soft on the platform and on Merrill. Perhaps soft isn’t the right word, but one suggested we had been “co-opted” by management and that we didn’t give enough voice to the FAs who believe it was bad for their own books of business. As one Midwest Merrill FA who phoned me said, “Either you believe in the full-service model or you don’t. Management seems to be hedging its bet at our expense.” He added, “You were sold a bill of goods.”

(Also, see RepTV, a recording of my appearance on Reuters Insider where I talk about Merrill Edge.)

He groused that our story did not represent how most ML FAs feel about the service—that it would cannibalize their business or at least undermine relations with their clients. “My clients value my advice, but I am going to be having uncomfortable conversations about my fees now. They’ll say, ‘Why should I pay you, when I could do it myself using ML research for free?’”

He complained that the positive quotation from a Merrill broker based in Princeton,N.J., sounded as if it had been “piped” by management (my word, not his; piped is a journo phrase for trying to get a source to tell you what you want him to say).

Will Merrill Edge cannibalize or undermine Merrill FAs? Two other East Coast-based Merrill FAs said Merrill Edge certainly has the ability to cause some trouble for them, but they weren’t too worried because their clients understood the value that they were offering to them: solid investment and financial planning advice.

One of the aforementioned FAs said, “[Management] isn’t advertising it too much so it’s as if they don’t really want us to sell it anyway. But, yeah, it undermines our business.” He stressed that his clients understood his fees and what they were getting for their money.

Another FA echoed his statement. “I have not received one piece of literature, glossy or any other tools to explain this to my clients. The announcement [about the revamped DIY trading platform] came out of the blue, took us by surprise.” He wasn’t too upset. “My clients know my value, that I understand the capital markets and create value. So, it doesn’t matter to me. Besides, we already had a do-it-yourself trading platform anyway.”

Would love to hear more from ML FAs on this. Give a call or reach me by email, [email protected]

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