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Merrill’s Push For Fee-Based Advice … and Banking

January 10, 2017

Convincing Merrill Lynch financial advisors to stop selling stocks and start selling financial planning required a shift in mentality and some incentivizing, the Wall Street Journal writes.

When Bank of America bought Merrill Lynch in 2009, only 23% of its 15,000 brokers served half or more of their clients on a fee-based model, according to the Journal. Now, that figure is 63%. Merrill broker Geoffrey Soper tells the paper the three decades he’s spent with the firm saw him change from a stockbroker cold-calling to make commissions to acting as a long-term financial planner — albeit one who also pushes deposit and credit accounts at Bank of America.

Executives at Merrill as well as other brokerage firms say the transition makes sense because clients are clearer on how much they pay in a fee-based model, the Journal writes. At the same time, the shift makes sense moneywise: Morningstar estimates fee accounts can bring in up to 60% more in revenue than commission-based accounts, according to the paper.

Nonetheless, John Thiel, currently vice chairman of Bank of America’s global wealth business, has said convincing Merrill Lynch brokers to make the transition was a major challenge while he headed the brokerage from 2011 to the end of last year, the Journal writes. And Chris Bettencourt, who oversees Merrill brokers in Boston, tells the Journal some brokers left the brokerage because they couldn’t transition from stock-picking to financial planning and banking product sales. Others left because they failed to get enough clients, he tells the paper.

For Soper, who manages more than $300 million on behalf of about 85 families, the transition required him to start introducing himself as a “Bank of America Merrill Lynch guy, rather than a Merrill Lynch guy,” he tells the paper.

Merrill also incentivized its brokers to sell more banking products: this year, they’ll have to make at least two referrals rather than just one to Bank of America’s banking unit or to the Merrill Edge online brokerage platform in order to collect the same pay.


The transition to fee-based financial advice at Merrill is likely to continue.

In November the brokerage decided to stop offering commission-based retirement accounts, saying it wants to reduce its brokers’ potential conflicts of interest under the Department of Labor’s fiduciary rule. The rule requires retirement brokers to put clients' interests first and is set to go into effect in April.

The brokerage has also signaled it will go through with the change regardless of whether the administration of President-elect Donald Trump repeals the rule, although the likelihood of a repeal remains uncertain.

Meanwhile, the advice industry is split on commission-based retirement accounts. Capital One and Commonwealth Financial Network have also announced that they’ll eliminate them, although Commonwealth has indicated that it could change its mind if the DOL rule is repealed. JPMorgan also said it will require retirement account clients to switch to fee-based advice or move to its self-guided online advice platform. But Ameriprise, Cetera, Morgan Stanley and Raymond James have all opted to leave the choice between commission- and fee-based accounts to their advisors and clients.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.