Merrill Lynch makes big changes in managed account program

Wed Jul 10, 2013 11:55am EDT
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By Jed Horowitz

NEW YORK (Reuters) - Merrill Lynch is overhauling its $438 billion managed account business, spending more than $100 million to streamline how brokers open accounts, build portfolios and charge for their efforts.

The project, which will be phased in from October through the end of 2015, aims to unify motley fee structures, performance reporting and billing methodologies associated with five different money management models introduced over two decades.

The programs range from "separately managed accounts" constructed by outside hedge fund managers for wealthy individuals to "wrap" programs in which lower-end clients pay a single fee to have advisers place their money into a group of mutual funds.

The renovation will "drastically" reduce paperwork, according to Merrill. Clients at most large brokerages now sign separate contracts for myriad accounts and receive performance reports as well as billing for each investment program. Account contracts can run from 672 to 120 pages, not counting more than 300 pages of welcome kits.

Merrill advisers today must manipulate spreadsheets on the side to get a consolidated view of clients' portfolios and go through laborious paperwork to mix and match among the five options.

"Advisers have done a phenomenal job of keeping the sausage-making as far from the client as possible, but it's convoluted for clients and advisers," said Lorna Sabbia, head of the managed solutions group at the Bank of America (BAS.N: Quote) Merrill Lynch Wealth Management division.

Merrill's new program calls for a single set of documents. Clients won't have to open new accounts when assets shift among programs, and the firm's almost 15,000 advisers will find it easier to create portfolios using strategies from multiple programs.


The Merrill Lynch logo is seen on a building in New York, May 7, 2012. REUTERS/Keith Bedford