Merrill Official Hammers Nail into Coffins of Stock-Picking Brokers
If you had any doubt that picking stocks and investments for clients is going the way of the buggy whip, Karen Burns, head of Merrill Lynch’s “goals-based consulting group” spelled out the message on Wednesday.
“It’s been over a period of time that has been slow, but I can stand here and proudly say that the landscape has really changed in the industry,” Burns said at SourceMedia’s Disrupt Advice conference in New York. “Most advisors recognize that if they’re not providing guidance to their clients around their goals, from a sustainability standpoint, then someone else will.”
Given that the conference was attended primarily by fee-based financial planners and registered investment advisers unaffilliated with big brokerage firms, the message could be seen as a shot in the bow from one of the grand-daddies of conventional brokerage.
Ninety percent of Merrill’s clients today are guided by at least one documented goal attached to their accounts, she said, while virtually all of the firm’s 14,000-plus force of advisors have accepted the need for “goals-based planning.”
Burns, to be sure, is talking her book since her job involves selling financial planning to the field. But she says that even more traditional brokers who grew up with their belief in their investment-selection prowess, are dropping their resistance to planning as a differentiator in an age of cut-rate robo advisors. They also have become more acquiescent to using company models and fund managers for investments at a time when the Department of Labor’s retirement account fiduciary rule has made transactional advice more risky. (Merrill’s decision to ban commission-based retirement accounts, of course, gives its brokers little choice in the matter.)
Like many of its competitors, Merrill also is hoping that “goals-based” client consulting will lead to sales of more loans and banking services from Bank of America. Such liability-side products generate more stable revenue sources than do stock and bond transactions that tend to flourish in rising markets and dry up during declines.
The biggest roadblock to adopting financial planning tools has been inertia and resistance to adopting new technology on the part of advisors as well as their older customers. “They weren’t open to learning new ways to use our financial planning software,” Burns said.
In helping brokers craft planning-based sales pitches, Burns advises them to lead with the question of where they stand in defining and achieving their goals. She pushes advisors to use software such as Merrill’s MyFinancialPicture, which has appeal since it asks clients to list assets held away from the firm.
To be sure, some advisors have been voting with their feet when asked to give up their traditional roles as investment managers. And some are reacting to hard-ball persuasion that firms have been adopting, including the threat of putting on probation advisors delinquent in client reviews.
“Bank of America has been slowly changing the firm over the last eight or nine years, but over the last couple it really sped up,” said Richard E Croasdaile III, who left Merrill in August after 29 years. “A lot of the decisions they were making were very hard and fast, and with little regard for clients and advisors running their business.”
A Merrill spokeswoman declined to comment.
While most brokers have adopted the new tools, discontent with the redefinition of brokers’ roles and mandates to use financial planning as a marketing tool remain strong motivators to leave, according to headhunters who have been poaching wirehouse advisors.
“It’s like the straw that broke the camel’s back,” said Rick Rummage, a Reston, Virginia-based recruiter.