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One of my sibs suggested the other day that Merrill Lynch is more into

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raccoon Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Mar-17-10 07:45 AM
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One of my sibs suggested the other day that Merrill Lynch is more into

serving as financial advisors to the bigger fish, institutions and so on, and Edward Jones to the smaller fish (individuals with some assets, but not mega-wealthy).

Is there anything to this or does it just depend on the individual financial advisor?

(This person just switched from an ML advisor to an EJ one.)

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A HERETIC I AM Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Mar-18-10 04:21 PM
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1. Edward Jones major competitor was AG Edwards.
Both were/are headquartered in St Louis, and AG Edwards primary focus was the "average investor", ie: Mr. and Mrs. Middle America. Now that AGE has been absorbed by Wachovia and then Wells Fargo, the fine reputation and history they had has gone by the wayside and Wells Fargo are no longer really interested in the investment accounts of the average American. If you have less than $1,000,000 - Wells Fargo Advisors isn't really interested in you. Sure, they'll take your account and they will act as a broker for you, but the average "FC" (Financial Consultant) can't make a decent living doing transactional business unless he has a $40,000,000 book. It takes a shitload of small accounts to make up a forty million dollar book. As a result, the FC's are stuck with constantly trying to expand their client base and if all you do all day is market yourself, trying to gather assets, your current clients suffer.

Edward Jones, as well as the likes of Raymond James continue to fill that smaller investor niche. For those people that have accounts that are less than 7 figures and desire the services of a full service brokerage, Edward Jones and Raymond James are about all that's left these days.

I think your sibling is correct, and here's why;

The advent of online trading and quick access to financial information has created a bit of a sea change in the brokerage business. The days of being able to justify the commission levels that used to be charged on a 100 share block of Boeing (as an example) are long gone, as anybody with a computer can set up an account at Scottrade or Ameritrade or ETrade and buy and sell any amount for $9.99 or less all day long. Of course, you get what you pay for in stock brokering as with anything else and in spite of the opinions of many DU'rs, the vast majority of retail brokers in this country really do have the best interests of their clients at heart (they just don't issue a crystal ball when you pass your Series 7). If you have an account at Scottrade, best of luck on having a face to face conversation with someone who is genuinely interested in you and your situation. It's just about a sure thing that you'll talk to a different person on the phone almost every time. Ditto ETrade and Ameritrade (and Vanguard and Fidelity, for that matter). Unless your account is significant, you won't get the personal service AG Edwards was famous for and R. James and E. Jones should still be offering. If your account IS significant and you DO want personal service, you are going to pay for it over and above your commission fees in one way or another with the so-called "discount brokers".

The problem these days is that the really large wire houses have no real interest in transactional business anymore because they can't compete with ten bucks a trade. What they really want is for their clients to go "fee based" or have managed accounts. That is to say they want to charge an annual fee based on assets under management, require the client to sign a discretionary agreement and put them all in mutual funds, to hell with individual stocks.

If you buy a mutual fund or a block of stocks or individual bonds, the only fees generated are on the buy and sell sides (buy side only with "A" share mutual funds). If you buy and hold for an extended period, which many, many people still do, you don't generate any ongoing fees, and the likes of Bank of America and Wells Fargo just can't have that. They're fucking banks after all, and their core business is taking in deposits and loaning out money. It is an extremely profitable line when you can pay a pittance on your deposits and charge 10% average or better on your loans. Since BofA snatched up Merrill, I'm willing to bet that large numbers of their lower end clients have had fee based accounts pushed on them.

Consider the perspective of the average FC:

What would you rather have?

400 client accounts averaging $100,000 per account or 40 accounts averaging $1,000,000 per account?

Take that one step further.

What would you rather have?

400 accounts that need constant attention and generate a commission stream that can fluctuate wildly or 40 accounts that are all on cruise control (fee based) and generate 1.5% annually whether you are in the office or not?

Yes, the larger firms want really large accounts or institutions they can charge a flat fee for.

They are more than willing to allow the online brokerages to have the rest.
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