Merrill Lynch Financial Advisor - Anybody familiar with their services?

[Disappointed]

Anybody uses their services? Our company is thinking about having them manage our excess cash, sort of like a custom blended portfolio (50/50 equity/bond).

We met with one of their advisors today, he was not able to give us a definite fee structure and we did not press it as it was our first meeting(approximately 1% on equity and about 30 to 50 basis points on bond). I wonder if they will negotiate the fee. We are looking to invest around 5 mil.

Anything that I need to know?

mP

 

[LOL!]

Without look too hard you can find better outfits that charge 0.25% or less. On $5 million maybe even 0.05% or less.

I guess the only thing you need to know is that you are getting ripped off.

 

[Delawaredave5]

My experience with ML is high fees, poor service, and marginal performance.

Other than that, they are great.

I have several customers who are small businesses and use Vanguard for 401k management and very happy.

 

[Disappointed]

Thanks Dave. This is excess cashflow that we are hoping to make a little more than money market which is about 0 pecent right now. Our 401k plan is with Fidelity and we are quite happy with it.

 

[Delawaredave5]

After I posted I realized you were not talking about 401k..... sorry.

I still suspect all ML products and services are overpriced and not competitive....

 

[FUEGO]

If you are willing to take a little principal risk, maybe call up vanguard institutional and see if they can put you in a short bond fund. I think their minimums are $1 million or $5 million IIRC. Or you could get some treasuries directly. Depending on liquidity needs and again willingness to take principal risk, 5 year treasuries are yielding 2.4% now and you don't pay a management fee.

Paying ML 1% on equities and 0.5% on fixed income is crazy. On $5 million, that is $37,500 a year, and they may put you in absolute garbage, like some proprietary junk they package and market themselves, or some leftovers from prior offerings that no one else wanted. The stuff might be significantly more risky than what you want, and not yield much more than fairly low risk short-ish treasuries.

Definitely shop around for money management services, since you can probably find a local firm that has more expertise, will be there to hold your hand, and charge much less given a $5 million portfolio.

Timely thread, since our company's pension-like plan has a meeting in a couple days where the poachers from BigBank's wealth management branch are going to try to come and win our business managing our fixed income portfolio. I'm the main person on the investment committee that dislikes wasting a percent to have someone do very little to boost yields. We are small players (under a million), and do just fine with the low expense vanguard funds for bonds. Otherwise these "investment gurus" will stick us in junk bonds, point out how much more yield they are earning us, and then shrug meekly if these junk bonds tank.

 

[clifp]

Timely thread, since our company's pension-like plan has a meeting in a couple days where the poachers from BigBank's wealth management branch are going to try to come and win our business managing our fixed income portfolio. I'm the main person on the investment committee that dislikes wasting a percent to have someone do very little to boost yields. We are small players (under a million), and do just fine with the low expense vanguard funds for bonds. Otherwise these "investment gurus" will stick us in junk bonds, point out how much more yield they are earning us, and then shrug meekly if these junk bonds tank.

That is a terrific paragraph describing the attitude of many financial helpers (borrowing Buffett's term). "shrug meekly" along with some justification that "it could have been worse" is so typical.

Paying 1% even 1/2% for fixed income advice in this interest rate environment is crazy. I'm curious how they can justify it now days. I am pretty decent marketing guy, but even I would have have trouble spinning why you should pay me .5% to manage your money when 1 Year Bill are only earning 1/2%.

 

[Onward]

I've had only one experience with a full-service broker, and it was everything Bogle and Bernstein promised it would be: lousy.

My now-ex company somehow picked Morgan Stanley to manage our Simple IRA plan. The broker assigned to us called himself a "Wealth Manager." It turned out to be his wealth he was managing, not mine. He was snotty, superior-acting, and brow-beat me for wanting to invest in low-fee index funds and ETFs. He acted insulted when I didn't take his advice to invest in his favorite stocks and callable CDs. His commission was $45/trade on stocks and who-knows-what on the CDs. In addition, Morgan Stanley was charging me $75/yr maintenance fee. I bought an ETF and just sat tight. He apparently lost patience with me and had my account transferred to the "call center." (Is that where they send bad little indexers?)

Anyway, our company president finally realized we were being fleeced and moved the whole plan to Fidelity.

I would really think twice about opening any kind of account with a full-service broker. Like Bernstein says, brokers service clients like Bonnie and Clyde serviced banks.

 

[73ss454]

I was with a full service broker for many years. The only thing I can say about them is that they made sure I was broker.

 

[Disappointed]

Thanks for all the responses. This particular advisor will assemble a stock portfolio (if we want 100% equity) and his fee is 1%. He said he may be willing to separate the muni bonds from his management fee if we want to own some of those (CA) so we are not subjected to the .5% (just his regular markup).

We also met with City National Bank (CA) wealth management people. They also charge 1% and .5% (pretty much the same as ML). They claim that they use proprietary Quant to choose stocks (top down). They will hold between 50 to 75 stocks in the equity port.

Both do not put your money in MFs but pure stocks, they buy and sell for you as they see fit. They said they do not make money on trade. For CNI, the minimum on equity is $1mil, for bond is $2mil.

I am not comfortable with such a focused portfolio, perhaps the only guys that I may trust to run focused funds are Buffet and Ken Heepner. I am inclined to suggest DCA into low cost index funds (domestic + international) but then somebody has to watch the portfolio and make a decision when to buy/sell.

Perhaps we need to interview more people. I am surprised that these people are still assemble stock portfolios rather than invest their clients' money in MFs.

mP

 

[FUEGO]

Heck, I'll manage it for 0.25%, and give you the same guarantees the big boys will give you! And I'll actually listen to you!

 

[LOL!]

For low cost, check out this web site: Evanson Asset Management - Main Page The fee would be less than one-tenth what those ML guys would steal from you.
I have not used them, have not spoken to them, etc. Do your own due diligence.

PS: Do not use FUEGO because even he charges too much.

 

[FUEGO]

Evanson Asset Management - Fees and Services

These guys manage for $2000 to $4000 per year, flat fee, depending on objectives. That is 0.04% to 0.08% of assets under management. They are passive asset allocators.

Edit: Heh, cross posted. Good thinking. Again, do your due diligence, but I seem to recall these guys getting good marks from Vanguard Diehards or elsewhere. I imagine $4000 would get you 20-40 hours of professional management time, which is all it should take to manage $5 million passively (no more work than managing $500,000).