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Econoday names Bay Area consultant Michael Milmoe as its president

Author Dina Hampton March 28, 2018 at 8:04 PM
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Michael Milmoe

People Moves

Stephen Winks

Stephen Winks

September 29, 2009 — 7:28 PM


Firms maybe can afford to be insular because it is self serving but not advisors because they are looking for every edge to excell.

The truth is 90% of brokers will never run their own advisory services business because of the administrative hassels, yet 10% are so driven to excell they will ultimately be forced to build their own firms because of Merrill’s inability to support them. This often entails the advisor’s desire to act in the consumer’s best interest establishing fiduciary standing which is not presently possible, but is not always the case. The problem is the 10% of Merrill brokers that will gravitate toward their own advisory services firm account for 30% of Merrill’s assets. Merrill, is being futile in trying to keep the Genie in bottle, when it escaped years ago. Many competing firms have profited by supporting brokers (1) as bank employees, (2) as independent advisors, (3) as employees, (4)as custody correspondants yet Merill affords its advisors only one way to do business—as employees. This is no secret to its top advisors who are informed by enterprising competitors of their alternatives and competitive advantages.

The famous Tully Committee Report to the SEC over a decade ago foretold the future of the industry was advice not commission sales (Dan Tully was a former Chairman of Merrill). Merrill is clinging to the old commission sales busines model while other firms like Schwab, Fidlity, Pershing, Wachovia and Raymond James are growing at a far faster rate. If Merrill continues its present strategy insular to industry redefining trends it will forfeit its market leadership. Perhaps Sally Krawcheck can successfully reintroduce the reasoning of the highly regarded Dan Tully back into Merrill. A fresh look, new blood and new market leadership could certainly be helpful.

Even with a robust custody capability, Merrill will clearily not loose all its brokers as Wachovia and Raymond James can attest. It will only loose those who feel constrained by Merrill’s inability to support them. Merrill has a choice: (1)loose its top advisors or (2)keep them as custody clients or (3) embrace a much higher level of support for advisory services which would restore the confidence of the investing public. Everyone is looking for bold decisive market leadership in the consumer’s best interest.

There is actually a case to be made that Merrill brokers are more profitable as custody clients than as brokers because massive internal cost and the overhead cost of branch aministration can not be allocated to custody clients, which calls into question the value of such overhead which is another topic.

Here Merrill is being self defeating by placing all its eggs in one basket as it appears it is doing. This is an all or nothing bet on an old and increasingly outdated business model. Just look at Schwab’s numbers, with just 20% of the advisors it is garnering far more net new assets than Merrill.

John Tyres is among the most capable custody executives in the industry, who has the vision and know how to compete. If Merrill can’t figure out how to do more than one thing at a time with enthusiasm and conviction, then they will inevitably loose market share and the tremendous talent of John Tyres who sees the opportunity and can execute.

In a dramatically changing business environment, what worked in the past will not only not work in the future, but will assure the loss of market leadership. Think of John Tyres the bird in the bird cage at the bottom of the mine that signals impending danger. The danger is a self defeating business strategy. The fact is the Genie is already out of the bottle and it is sad that Merrill has become so insular to market forces it thinks it can put the Genie back in.

Tom Reilly

Tom Reilly

September 30, 2009 — 1:12 PM

Merrill has never shown the committment to this business that their competitors have. The one area where they are very good is technology, but with all of the resources at their disposal, they have never figured out how to deliver all of the products in a coordinated stramlined fashion. The custody area has always been treated like the “red-headed step-child” of the firm. They have occasionally “talked the talk”, but they never “walk the walk”.

Bob Lee

Bob Lee

September 30, 2009 — 3:26 PM

That is why many RIA’s have chosen to join the better independent Broker Dealers. My client in NYC is very interested in supporting RIA’s. I’d be happy to discuss it. boblee AT careergoals.com

Stephen Winks

Stephen Winks

September 30, 2009 — 5:47 PM


Merrill certainly has better technology than independent broker dealers, but the technology necessary to support commision sales is totally inadequate to support an asset/liability study, investment policy, portfolio construction and performance resporting required for fiduciary standing. To make the full range of advisory services (transactions, planning, consulting, fiduciary counsel) safe and easy to execute by every advisor, it must (1) support a functional division of labor (Advisor, CAO, CIO), (2) provide a prudent process (asset/liability study, investment policy, strategic asset allocation, portfolio comstruction, performance monitor, tactical asset allocation) in support of fiduciary standing with (3) statutory documentation, an audit path and expert third party opinion letter to prove fiduciary standing (4) manage, not just disclose, conflicts of interest, (5) support the full range of advisors services that will both (a) accept clients and their holdings as they are (b) as clients will allow. This level of support is not available at independent broker/dealers (LPL, ING, AIG, Raymond James, etc.), RIA roll ups (Focus, United Capital, etc.)and can not be achieved through custody (Schwab, Fidelity, etc.) relationships either. This is the market leadership and statesmanship in the best interets of the consumer that every advisor and consumer prefers—it is just not an extrapolation of a conventional brokerage business model—it is a new faster, better and cheaper advisory services business model. It is new market leadership that preempts everything that has come before it. Merrill has the scale, it just needs nudging and the vision (Krawcheck/Tyres, etc)to recapture its once dominant global market leadership. If Global market leadership in advisory services were to become Merrill’s objective, it would quickly out date every custodian, independent b/d and wirehouse and would reverse the flow of assets into those firm back to Merrill but with tens times the effect. Thus the opportunity for disruptive innovation and Merrill Lynch. It is simply a matter of vision and principled leadership.

Don’t give up on Krawchech and Tryes.


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