Merrill takes hits in court, arbitration

Already reeling from billions in losses due to bets on subprime mortgages and turnover in top management, Merrill Lynch & Co. Inc. of New York has also lost two legal cases in the last month that centered on the firm’s management of wealthy clients’ portfolios.
One case was a jury trial in Florida involving a wealthy philanthropist that stung Merrill in October for $7.75 million.
The other, also in October, was an arbitration claim in Indianapolis that cost Merrill $3.3 million and focused on the loss of a client’s concentrated stock position.
While Merrill Lynch’s platform for wealth management, including its access to capital markets products, is strong, its advisers can fall short at delivering those services, one consultant, who is also a former Merrill employee, said.
“The gap is in the background and training of the financial advisers,” said Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy LLC, an independent consultant. Merrill has wealth management specialists, “but lacks training on the ground,” said Mr. Welsh, who worked at Merrill from 1992 to 1999.
“They have a wonderful set of tools, but at the point of sale (advisers and reps) may have gaps in training and learning and understanding,” he said.
The two legal decisions involving wealthy investors were “anomalies,” said Mark Herr, a company spokesman.
“It is fairly well accepted that the firm has the premier wealth management business in the industry,” Mr. Herr said in an e-mail.
“These cases are … not representative of our client experiences and in both cases the facts are highly idiosyncratic to the particular clients.”
For the full report, see the upcoming Nov. 19 issue of InvestmentNews.

Related Topics: Merrill Lynch