BofA’s latest weapon in discount brokerage war: Merrill’s brand

Bank of America Corp. is re-branding its online-discount-brokerage platform under the Merrill Lynch imprint in an attempt to attract young investors, and reclaim assets of Merrill clients who keep self-directed brokerage accounts at rivals such as Charles Schwab & Co. Inc. and TD Ameritrade Holding Corp.

Bank of America Corp. is re-branding its online-discount-brokerage platform under the Merrill Lynch imprint in an attempt to attract young investors, and reclaim assets of Merrill clients who keep self-directed brokerage accounts at rivals such as Charles Schwab & Co. Inc. and TD Ameritrade Holding Corp.

Banc of America Online Investing, which has has about 500,000 accounts inherited from Quick & Reilly and other discount brokers that BofA purchased over the years, today will be rechristened Merrill Edge, according to spokeswoman Selena Morris. The bank plans a marketing campaign for Merrill Edge in early 2011, she said.

Commissions will range from $8.95 a trade — competitive with major rivals — to zero for the first 30 trades a month made by clients who keep a combined $25,000 in their bank and brokerage ac-counts. BofA has had the free-trade program in place since 2006 but has made little headway in attracting clients from online rivals because it is hard to change customer loyalty and because technology on the bank platform is “subpar,” Patrick O’Shaughnessy, a brokerage firm analyst at Raymond James & Associates Inc. wrote in a research report.

Rather than stealing customers from discount-brokerage rivals, the re-branding risks antagonizing Merrill’s full-service brokers and could drive more of them to become independent advisers, he wrote.

“This … could ultimately be to the benefit of firms like Charles Schwab and TD Ameritrade, who are major players in the business of offering back-office support to independent advisers,” Mr. O’Shaughnessy wrote.

Merrill, which has more than 15,000 financial advisers and about $2.2 trillion in client assets, said that the offering is aimed largely at clients with $250,000 or less to invest, below its advisers’ radar. Merrill gives little or no payout to brokers who serve such clients and steers most of those clients to its call centers.

The venture is another attempt to have “an integrated bank and brokerage offering” following BofA’s takeover of Merrill, said Dean Athanasia, head of the banking and direct-investment division at Bank of America Global Wealth and Investment Management.

Ms. Morris said that the venture could benefit Merrill advisers by giving them a view of their clients’ self-directed accounts, something that would require pre-approval from each client.

Shares of Schwab and TD Ameritrade initially fell when The Wall Street Journal last week reported that Merrill was launching an online discounter, but later rebounded.

Schwab in January dropped commissions on all online stock trades to $8.95, and Fidelity Investments Investments followed with a $7.95 charge for online U.S. stock transactions. TD Ameritrade left its prices unchanged at $9.99 a trade, while E*Trade Financial Corp. charges be-tween $7.99 and $9.99, depending on the number of trades.

“The price cuts did not seem to shift market share at all, and TD Ameritrade, which left its prices unchanged, has fared just fine competitively,” Mr. O’Shaughnessy wrote. “We believe that the re-branding of Bank of America’s online-brokerage platform to Merrill Edge will similarly not have a meaningful impact on the independent online brokerage firms.”

This story was supplemented with reporting by Bloomberg News.
E-mail Jed Horowitz at [email protected].