Exclusive: Merrill brokers win a battle to lower client fees on advisory accounts

Thu Jun 4, 2015 7:02pm EDT
 
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By Jed Horowitz and Elizabeth Dilts

NEW YORK (Reuters) - Merrill Lynch this week surrendered to pressure from its retail brokers to allow them to cut account fees for wealthy clients, retreating from a two-year effort to force increases as part of a shift to a new platform, according to a memo obtained by Reuters.

The Bank of America-owned brokerage (BAC.N: Quote) told its 14,000 brokers almost two years ago they would be paid less if they cut fees too aggressively on a new account the firm was introducing. The policy gibed with a broad effort across Wall Street to curb heavy discounting of fees and commissions by brokers.

But many Merrill brokers complained that the policy would either antagonize customers if they followed it or hurt their own wallets if they did not.

Several told Reuters that they would wait until the last minute to move assets from five older systems that are being consolidated into a single new one - a shift that would trigger the change in fees but run afoul of Merrill executives' hope for a timely transition to the new system.

In a memo sent to brokers on Monday, the firm relented, giving them leeway to cut fees by 15 percent or more on certain accounts to avoid penalizing both clients and brokers.

Merrill introduced the new system, called Merrill One, in late 2013, but gave brokers until the end of 2015 to transfer clients' assets. As of this week, six months before the deadline, over 40 percent of $650 billion in client funds eligible for transfer had not been moved to Merrill One.

“There has been a lot of backlash on the fees," said one broker, who asked for anonymity because he is not authorized to speak publicly about company policy.

Merrill Lynch promoted the new platform internally as a way to simplify billing and account management for brokers and clients. But in the short term, transferring clients to the system requires brokers to fill out new account paperwork and to engage in a potentially uncomfortable conversation about pricing.    Continued...

 
A Merrill Lynch building is shown in downtown San Diego, California March 18, 2014.
 REUTERS/Mike Blake