From the August 2011 issue of Research Magazine • Subscribe!

July 26, 2011

BofA to Expand Merrill Edge Advisors

Bank of America said in mid-June that it planned to nearly double the number of Series 7 financial advisors serving its mass-affluent Merrill Edge client base to more than 1,000 by 2012. “We now have about 150 Financial Solutions Advisors in branches and plan to go to 500 by year-end, for a total of 1,000 Financial Solutions Advisors,” in both the branches and call center, said Cary Grace, a preferred sales executive at the Bank of America, in an interview. “This is a huge opportunity for us.”

Bank of America rolled out the Merrill Edge platform in June 2010. It targets both Bank of America-U.S. Trust clients and Merrill Lynch mass-affluent clients, those with between $50,000 and $250,000 in investable assets. Clients in this category can work through self-directed programs online, via the group’s phone-based service center — the Merrill Edge Advisory Center — or in some BofA branches.

In 2010, after it was launched, analysts said it represented a competitive threat to online brokers like Charles Schwab and a model for how wirehouse firms in general can stem the loss of clients to online rivals. Bank of America says it now has more than 8 million mass-affluent customers using Merrill Edge with some $67 billion in assets. Assets held in Merrill Edge accounts grew about 19 percent from the first quarter of 2010 to the first quarter of 2011.

A growing number of Merrill Edge advisors will be located in banking centers in cities such as New York, San Francisco, Los Angeles, Dallas, Charlotte, N.C., and Washington, D.C. They will also be available to offer phone-based guidance through the Merrill Edge Advisory Center. According to Grace, a growing number of Merrill Edge clients want to visit a branch more frequently than in the past to discuss products or handle more complex transactions like 401(k) rollovers.

Merrill Edge clients are not paired with advisors in a one-on-one relationship as they are within the wealth-management operations of Merrill Lynch and U.S. Trust. However, they “have access to the best Merrill Lynch research and other capabilities, as well as the top Bank of America bank products and distribution,” said Grace. “It’s the best of both worlds.”

The role of Merrill Edge FSAs, she says, is to “uncover” client needs. “If a customer is better suited, they can be referred to the Global Wealth & Investment Management [division],” she explained. “This is a core part of the role of FSAs.”

Boosting the number of Merrill Edge advisors is part of BofA’s build-out of the online Merrill Edge platform — which just marked its one-year anniversary, Grace explained: “The preferred customers have said that it’s important to have [certain] transactions and purchases done face to face, and they’ve wanted to have [specialists] and experts at these points of purchases.”

At the end of the first quarter, Merrill Lynch had nearly 15,700 advisors, while U.S. Trust had roughly 1,500. Overall, the wealth-management unit has some 20,300 employees interacting with clients.

BofA says it is introducing “specialty stores” with investment, small business and mortgage specialists, mobile applications for iPad, iPhone and BlackBerry and roughly 500 no-transaction-fee (NTF) mutual funds, as well as hiring 1,000 small-business bankers in local communities (in addition to the new FSAs).

In other news, a FINRA arbitration panel ordered Merrill Lynch Professional Clearing to pay more than $63.7 million to Rosen Capital Partners, a hedge-fund group, as compensation for losses incurred during the 2008 financial crisis, according to an award document released by FINRA in early July.

The Los Angeles-based panel found Merrill’s clearing unit liable for about $63.7 million in compensatory damages as well as 9 percent interest accruing from October 7, 2008 — representing about $15.5 million. Punitive damages were denied.

Rosen had alleged damages caused by “unexpected margin calls” and sought punitive damages for what it said was a breach of contract, fraud and negligence on the part of Merrill.

“We strongly disagree with the arbitration panel’s award, which is contrary to the facts presented,” said Merrill Lynch spokesperson William Halldin in a statement. “At all times, we met the contractual requirements of our relationship with this sophisticated hedge fund, which sought to blame us for losses during a period of extreme market volatility in October 2008. We are considering additional action in this matter, including asking a court to overturn this award.”

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