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Will Merrill Lynch’s new online brokerage offering make a difference?

There’s been a lot of speculation about what or what not Merrill Lynch (now owned by Bank of United States of America) intends to do with its re-launch of Edge, Merrill’s online brokerage offering.  Here’s a quick summary of what was punted around post-announcement:

  • MorganStanley: We do not view Bank of America/Merrill Lynch’s new online brokerage product, Merrill Edge, as a serious competitor near to medium-term to Schwab and TD Ameritrade. Bank of America and Wells Fargo/Wachovia have had online brokerage products for some time and they haven’t impacted TD Ameritrade and Schwab’s ability to grow assets – clients choose to use one product over another and don’t easily switch. — Analyst, Celeste Mellet-Brown
  • FBR Capital Markets: Bank of America will need to invest hundreds of millions in technology, customer support, and branding to truly compete for new customer assets. — Analyst, Matt Snowling
  • Raymond James: It’s “highly unlikely” that Merrill Edge will cause a significant number of existing clients to leave Schwab, TD Ameritrade or E*Trade. We believe this is simply a re-branding of Bank of America’s existing online brokerage .– Analyst, Patrick O’Shaughnessy
  • RIABiz: Such access could take the form of a team of advisors who handle inquiries up to some form of a hand-off plan where customers being handled by call centers could get referred to a full-service broker as their assets grow and their needs for advice become more sophisticated. In this hand-off endeavor, Merrill Lynch could have – in one respect – an edge over Fidelity, TD and Schwab, which have been successfully handing off billion of dollars of assets from their branches to RIAs for several years.
  • Registered Rep: The idea is to convince current clients to give them the “play” money they have parked at the discounters, which can amount to substantial sums, and to capture the hearts and minds of young people who have yet to amass their wealth. We’re talking serious dollars here. At stake is a coming intergenerational transfer of wealth—the evolving wealth of today’s 87 million-strong, 20-something “millennial” population, born between 1979 and 1999. This wealth is projected to grow from $172 billion today to a staggering $13.4 trillion in investable assets (liabilities reaching a shocking $16.2 trillion) by 2030, according to internal Merrill research.

My Take

All of the reasons that Merrill Edge shouldn’t work (technology and service investments, channel conflict with Merrill’s financial advisors, incumbent leadership) are valid. Merrill’s 15,000 member strong advisory unit is/was a driving force for the firm and many of them view this launch as a threat to their core businesses.

But here’s the thing: I’ve written repeatedly that wealthy and soon-to-be-wealthy investors employ a combination of full-service and do-it-yourself investment tools.  In fact, many of the brokerages are courting these types of investors with automated, professional-grade services, like E*Trade’s Online Advisor.  As the future unfurls, these types of investors will continue to use tools and services that satiate the comfort of control and the need for professional advice.  Merrill Edge plays right into this.

This isn’t about getting a $25k minimum account and praying the account holder brings more.  It’s a foothold, but it’s also a way to hold onto wealthy clients with a lot more money under management as they oscillate moving their funds in into and out of semi self-directed tools and professional money managers.  Edge gives that money one home.

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Tradestreaming is a community of investors learning directly from experts. I’m Zack Miller, investor, entrepreneur, and founder of Tradestreaming.com and I literally wrote the book on how to invest in the age of Facebook and Twitter. Tradestreaming is the resource I’ve created to help me become a better investor.  I believe it will help you … Continue Reading