August 20, 2013

A 5-year $100 million overhaul at Merrill Lynch aims to bring together five separate adviser platforms into one. The consolidation will streamline contracts, unify the fee structure and improve the tools advisers use to manage accounts and build portfolios.

By the end of 2015 the entire company will be working on the one system, internally referred to as Merrill Lynch One. The platform will begin roll out the day after Labor Day in select geographic regions, accompanied by teams of trainers and support staff. Once all areas are up and running Merrill will sunset the five older platforms. More than one million Merrill clients have some kind of managed account.

Today, Merrill Lynch's five managed account platforms include Consults, Mutual Fund adviser (MFA), Personal adviser (MLPA), Personal Investment Advisory (PIA) and Unified Managed Account (UMA) platforms. Each platform, introduced between 1989 and 2007, was built for different regulatory environments, leadership and strategy than the present day. Variations in the technology budget played a significant role in their design. 

The platforms were ultimately product-driven, not client-driven, and built in silos without collaboration. Currently, advisers are forced to go to five different places to do their work, often times duplicating functions in ways that are incredibly inefficient and not intuitive. Merrill expects this new consolidated platform will simplify the adviser and client experience in a meaningful way.

Fight over Fees

This change comes amid some controversy, particularly about the unified fees. The Wall Street Journal reported thousands on Merrill customers would see fees raised up to 50%, and some of its 14,000-plus advisers are concerned the costs may drive clients away. But in a phone interview with Lorna Sabbia, who as taken the lead on this project as head of Merrill’s managed solutions group, she says the article has missed the mark.

"This has been a body of work based on adviser feedback we knew we had to address," says Sabbia. "An important point to recognize is that combining 5 fees into 1 is valuable because it's being applied to household and relationship value, versus the industry's account asset value. It allows advisers to treat clients as an enterprise instead of an account. … I want to stress that this wasn’t done in the shadows of the night. We are transparent with this complex work and in alignment with advisers."

The unified fees are intended to simplify the relationship with clients, giving them services to all branches and creating a more intuitive interaction. "There's nothing worse than having a mortgage and deposits, yet for investment advisory we're going to pretend we just met you. Now we can recognize all the holdings and apply that to the assets you have," says Sabbia. She adds, "In the [WSJ] article, it said every adviser is upset, but that's not the case. Many have been asking for this for years, they can't wait."

Even so, the fee changes take away the price flexibility from advisers, setting minimum fees based on the amount of money a customer has in Merrill accounts, including managed and brokerage accounts, as well as Bank of America deposits. Customers with accounts across several platforms are most likely to see a drop in overall fees, according to the bank.

Advisers will be able to take a cut to their own compensation in order to offset client fees charged below the minimum, although Sabbia expects that to be a very small portion of the business. Even so, she says they will be checking in on the issue as the platform rolls out and is tested in the live market. All clients have the option of using the new single platform or staying on the old platform through 2015. No client can be switched over without first signing a new agreement with Merrill that acknowledges fee changes and the full range of services and advice it covers across the new platform.

Adviser Benefits

Like any older system with irritating redundancy and flaws, users have learned to master them. With some of the existing platforms as old as 24 years, you can imagine some advisers are not happy about giving up their familiar ways. But the development team is confident even the naysayers will come to embrace the new system.

According to those close to product development, the new platform offers a dashboard for easy navigation of client information and simplified account opening. Administrative work to enroll clients will be significantly reduced because one set of paperwork and disclaimers will now streamline the enrollment process. In the past a unique set of signatures, fees and general administrative work would have been required to add accounts in a different platform.

Because advisers will no longer be working with siloed platforms, they can easily transition to another account as needed. This will be especially valuable for portfolio grouping. For example, seeing a client has a low risk bonds portfolio in one account and more aggressive equities in another. Instead of looking at them as different investment objectives, advisers can take a holistic view and will find it easier to discuss those accounts with clients, according to Merrill Lynch.

"The platform is really going to be ahead of the industry," says Larry DeLuise, private wealth adviser with Merrill Lynch’s private banking & investment group, who is part of a 12-person advisory board, all from different specialties within the firm that have given their feedback on the project throughout its development. "I really think what’s going to happen is it's really going to streamline client associations from an administrative and operating standpoint. That gives us more time to be proactive in other areas of our business. From our standpoint, you’ll be able to leverage more platforms than you could before, and navigation between them takes away cumbersome decision making. As for the client experience, when meeting with advisers, they will not have to sign different sets of paperwork, and they won't have to necessarily understand the silos. Having things like a single fee schedule and this one platform makes the advisers relationship more efficient."

"We can't wait," says Mary Mullin, a Merrill Lynch financial adviser based in Boston who is also on the advisory board. "We're excited to be on the new platform. All of my colleagues are asking how to get on the pilot." She says Merrill has put a lot of resources into the platform training through introductory calls, online tutorials, a rollout team walking users through the new platform and specialists that will follow up regularly once deployed. "We're doing everything we can to make sure we're comfortable and up to speed."

The team building the platform is described as a mix of internal and outsourced tech and operations. "We couldn’t find a way to stump them. They've done their homework," said DeLuise. "They've made all the necessary changes to give clients a simplified approach to working with advisers … When we introduce the platform to advisers looking at it for the first time, they ask questions, but they find it’s all been thought through."

"It’s all inclusive, from our seats as advisers," adds Mullin. "I can't think of anything that’s missed."

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