Brokerage firms have been making these sorts of moves for years, and Merrill is notorious for a leaked memo in the late 1990s that discouraged ''charity work'' for clients with less than
That patrician view is probably a minority one: if the people who run
But Merrill's decision to tell its brokers that they might not get paid if they persisted in working with such people reflects one of the sorriest truths of the financial services industry: Nobody has figured out a way to consistently give large numbers of people reasonably priced financial advice across all areas of their life and to do so in an ethical manner.
The case of Merrill — and its effective opposite, a start-up called LearnVest — is instructive in part because it reflects how the world of managing money has changed since
Many brokerage firms have backed away from that sort of stance in recent years. An old saw in the industry notes that the little old lady with the diminishing balance who hounds you when her dividend checks arrive late takes up five times as much time as a 50-year-old millionaire.
Besides, you make more money serving richer people. So the big firms (and thousands of smaller operations and individuals) fight hard over the 1 percent and then siphon off a small cut of their assets each year through fees and other revenue mechanisms.
Everyone else ends up at
A few years ago,
Nowadays, a thrifty Merrill customer with modest sums is told to use a service called Merrill Edge. And Merrill is taking its best shot at attracting and keeping them (and eventually) upgrading them to a real broker), given that it believes that there are 28 million households with
The people who service them are called
The company (to my great surprise) could not say how many of them were certified financial planners, the sort of people trained to look at a client's whole life before making investment recommendations.
If Merrill isn't tracking this, it's tempting to conclude that the company doesn't make the credential (and holistic advice) a priority and that all it wants to do is push investments. Still, Merrill does the right thing and encourages people to earn the certification by covering classes for F.S.A.'s who want to become certified financial planners.
The Merrill Edge investment account costs a flat
Anyone working this way needs to ask their adviser for a plain-English explanation of how much money, if any, Merrill stands to collect in any way, shape or form now or in the future, based on the mutual funds it selects for you. And if any of you have asked an F.S.A. for a collection of low-cost Vanguard or similar funds, I'd be curious to hear what the reaction was.
On compensation, Merrill appears to be doing the right thing, meanwhile; advisers earn a salary plus incentives based on the amount of assets they gather and manage, whether it's in bank savings accounts or in mutual funds or other investments.
The most curious thing about my conversation with
Contrast that with LearnVest, which opened for business in late 2009 with a focus on helping younger women. The company patterns itself in part after
LearnVest's most intriguing offering, however, is something it introduced earlier this month: three tiers of access to financial plans of varying detail. Customers also get e-mail or phone access to live certified financial planners who can help put the plans to work. Prices range from
''We don't think financial planning should be a luxury to anyone,'' said
But you get what you pay for, and the biggest thing you do not get from LearnVest is investment advice. It's not a registered investment adviser, so it can't tell you what mutual funds to pick. Yet the company persists in calling its plans ''core'' and ''complete'' and mentions retirement planning when promoting one of them.
''We are confident that the language used in our marketing, terms and conditions, and disclosures clearly define what is and is not included in each plan package,'' the company said in a written statement. ''We have received great demand in the last week from members across the country and have not encountered any confusion.''
Meanwhile, her fees are cause for suspicion; can she really pay her seven full- and part-time planners a good wage and turn out a good plan while charging such low fees? She said that she was confident enough in the profit margins she had built into the service that she was willing to take the same no-new-fee pledge (for 24 months in this case) that my friend
That said, Ms.
As for those planners,
LearnVest hired her from Merrill Edge, of all places, where she worked in the
In recent days, according to Ms.
''The way we think about this is that we would love to have those clients,'' she said. ''Everyone is looking. We're one big fishbowl.''
This article has been revised to reflect the following correction: An earlier version of this column incorrectly referred to the customer service employees of Merrill Edge as
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