Merrill urges brokers to go for golden eggs

In a twofold effort, Merrill Lynch & Co. Inc. is pushing its brokers to chase client retirement assets.

At the start of the year, the New York-based brokerage giant unveiled a plan for its 14,600 brokers to snag clients’ individual retirement accounts.

The thinking at the firm is that many IRA accounts are up for grabs, particularly as corporate America continues to lay off workers, thus creating potential rollover accounts, sources inside and outside the firm say.

Merrill is also looking to bolster its position in the defined-contribution market, an area in which it has recently lagged.

Merrill Lynch “is helping brokers to develop strategies to gather assets,” says Ken Worthington, an analyst with CIBC World Markets Corp. in New York. “It’s saying we, as a firm, think there’s an opportunity here.”

“It’s important to gather assets to offset the decline in market,” he says.

About eight months ago, Merrill revamped its efforts for brokers to chase defined contribution pension plans at companies with retirement assets of between $7 million and $60 million, says one broker familiar with the effort.

The effort comes at a time when Merrill Lynch has been looking to revamp its brokerage operations. Last year, for example, the firm’s brokers wrote more than $20 billion in mortgages.

Those inside and outside the firm have had a mixed reaction to the push for brokers to grab more retirement assets. Some argue the effort will help brokers, while others believe gathering retirement assets is a strategy brokers should have been pursuing regardless of the market climate.

At the end of last year, Merrill Lynch’s retirement group had assets in excess of $265 billion, according to the company. That accounted for corporate plans as well as IRAs.

One veteran Merrill registered representative says that the two major themes for the brokers are IRAs and the firm’s effort – newly dubbed Beyond Banking – to appeal to customers as a diversified financial services provider.

The broker, however, disparages the effort, which comes at a time when both clients and their brokers feel “shell shocked” by the market.

“It’s an old theme rehashed,” the broker says. “It’s something we should have been doing all along.”

Still, the firm is offering its brokers incentives to bring in new IRA assets, brokers say. They include trips to Key Biscayne, Fla., and Beaver Creek, Colo., as well as a Disney cruise.

Partnering up

Another broker praises the firm’s efforts to expand its reach into the 401(k) marketplace.

Merrill Lynch typically hasn’t gotten involved with a company in the past unless the broker had a relationship with the chief executive or the board of directors, the broker says.

That’s changed, the broker says. “Brokers are partnering up better with Merrill to go after larger plans.”

This overhauled offering comes after the firm did a “poor job” over the past few years in retirement plans, the broker says.

One distinct feature of the 401(k) effort is that it automatically rebalances clients’ portfolios, depending upon their tolerance for risk, the second broker says. Those include such categories as moderate and aggressive risk, the broker says.

And according to the broker, the emphasis on retirement business is clearly not for every broker at the firm.

“Brokers are embracing this” emphasis on retirement assets, the broker says, “but it’s select individuals and clients. Brokers with too many clients struggle to capture those assets because of the difficulty in staying in touch with clients.”

In October, Merrill Lynch hired Ibbotson Associates as the expert driving the defined-contribution plans’ asset allocation recommendations, says Michael Henkel, president of the Chicago firm.

That keeps Merrill Lynch in line with a December 2001 Department of Labor ruling that allows independent financial advisers to become more involved with 401(k) plan participants under the Employee Retirement Income Savings Act.

Broker-dealers are looking hard at independent advice for defined-contribution plans by firms such as Ibbotson, says Mr. Henkel.