Merrill Lynch advisors are now going to offer participants in Merrill-run retirement plans specific buy and sell recommendations. Indeed, participants may elect to turn over all investment decisions to Merrill advisors.
The specific advice dispensed will be based on data generated by Ibbotson Associates, the Chicago-based investment consultancy founded by Professor Roger Ibbotson. Founded in 1977, Ibbotson is best known for its asset allocation and manager due diligence that it provides to institutional investors. It also is known for its historical studies on the capital markets.
Brokers contacted by Registered Rep. said they had been told to hit the streets to "look for opportunities" in the 401(k) arena.
"Given the difficult markets and the current demand for advice and guidance, we believe the personal delivery of advice about investment options will be well-received by individuals in 401(k) and other retirement plans," James Gorman, President of Merrill’s U.S. Private Client Group, said in a statement.
The service, Merrill Lynch AdviceAccess, is currently in a pilot stage in New York, Los Angeles and Nashville; it won’t be rolled out nationally until 2003, according to Diane Talbot, head of 401(k) retirement group products.
This is the first time Merrill is offering such a comprehensive retirement planning program, and training is being offered to brokers, who will not have quotas or specific goals placed on them, Talbot says.
While other firms have announced such initiative, notably AIG’s Sun America unit, Merrill is the first major brokerage to get its advisors into such a plan.
Merrill is only legally able to offer a 401(k) plan after the Labor Department late last year approved a plan allowing brokerage firms to dispense investment advice generated by an independent, third-party expert. The Labor Department’s ruling reacted to a proposal by Sun America. The Labor Department oversees retirement plans under the Employee Retirement Security Act (ERISA), which prohibits brokerages from offering anything but educational investment advice—to prevent any conflict of interest.
"I think this is a service that is going to be beneficial to us in the long run," a Merrill broker says. "Obviously, it’s a huge market, one that we haven’t tapped until now. There’s potential for a lot of business to be generated in this area. I’m excited about getting into it."