BofA Plans to Roll out Robo-Advisor in Q1 2017
Bank of America Corp. is preparing to roll out an automated investing service in the first quarter next year aimed at mass affluent and younger investors in its Merrill Edge unit, according to a company spokeswoman.
The robo-advisor, called Merrill Edge Guided Investing, charges an annual fee of 0.45% and requires a minimum of $5,000 for portfolios primarily comprised of exchange traded funds, according to a brochure filed with the Securities and Exchange Commission on Monday.
It will initially only be available to Merrill Edge clients. However, the 14,400 financial advisors in Bank of America’s Merrill Lynch wealth management unit will be able to refer clients to Guided Investing later in 2017, according to a source. At that time, Merrill Lynch brokers will receive a one-time asset-based commission for a referral, the source said. The firm already offers a small commission for brokers who shunt their so-called mass affluent clients with less than $250,000 to invest to Merrill Edge. The unit, part of Bank of America’s consumer banking division, has a total of $132 billion in client assets.
While the new service could stoke fears of internal competition and fee compression for Merrill Lynch advisors, who were briefed on the new service last week, most view investment management as a commodity, according to a Merrill Lynch advisor in New York who spoke on the condition of anonymity.
“Most financial advisors feel that if they are running an advice-based business model including reviews, estate planning, customized portfolio management, etc., that it should not affect current relationships,” the advisor said. “The fear is millennial and Gen X look at cheaper alternatives, but it is not a hot point from what I am hearing. Younger advisors I would imagine [are] a different story.”
The new Guided Investing website touts that the investment portfolios will be managed and rebalanced by a team of Merrill Lynch portfolio managers. Investment selection is overseen by Chris Hyzy, chief investment officer for Global Wealth and Investment Management. However, it directs customers with “sophisticated needs” to Merrill Lynch or U.S. Trust, its private banking unit.
The service matches similar efforts by Merrill’s wirehouse competitors. UBS in May announced a partnership with robo-advisor SigFig as a way of targeting mass affluent investors. Morgan Stanley and Wells Fargo Advisors have both hinted that they are developing similar in-house solutions. Wells Fargo’s is also expected to launch early next year, according to reports.