Merrill Lynch Direct Review

Section 1: Web Site Functionality Rank

Navigation
Navigation on the Merrill Lynch direct site is a little clunky. The pages aren't cluttered, but it can be hard to find what you're looking for. The site is also missing a consistent look and feel, some sections look like they haven't been updated since the site rolled out in 1999 while others use the latest flash technology to present products.

We weren't really surprised that Merrill Lynch isn't a leader in this category, they don't try to be. They specialize in personal relationships, they tend to work with clients one-on-one with an emphasis on higher net worth individuals.

Dependability
We couldn't find any record of site crashes, lag or browser problems, you can count on dependable service from Merrill Lynch Direct.

Customization
There aren't many customization features, not even for your personal portfolio tracking or home pages. The limited customization options gave us the same impression as the site navigation. Whether you're talking to reps or browsing the site and product offerings, you quickly get the feeling that Merrill Lynch Direct is just another way for the parent company to attract new customers for advisor managed accounts rather than a platform for self-directed investors.

When Merrill Lynch Direct rolled out, one of the senior executives close to the project stated that the site "complements, but does not replace, the value of professional advice and guidance provided by Merrill Lynch Financial Consultants — particularly for those clients with sizeable and growing financial portfolios." And that's still true today, this site is not a good fit for the self-directed investor with < $100,000 portfolio. The site is ideal if you want to let someone else manage your money and only need to do research or check your balance occasionally.

Trade Execution
Merrill Lynch Direct doesn't offer any kind of trade guarantee, which we thought was strange for a brokerage of this size and reputation. However, there was no evidence of slow transactions or price discrepancies. Trade executions at Merrill Lynch Direct are fast, accurate and secure, but it would still be nice to have a guarantee.

Section 2: Trading Costs and Fees Rank

Intuitive Commission Structure?
Painfully overcomplicated. Merrill should just set high flat fees like many of the other high-end brokers. That would eliminate the need for all of these annoying charts and calculations.

Minimum to Open an Account
$2,000 minimum to open a new account.

Stocks
Internet Trades = $29.95 + $0.03 per share over 1,000
Interactive Voice System = Not available
Broker Assisted = 0-100 shares = $50, 101-250 shares = $50 + $0.25 per share, 251-500 shares = $50 + $0.125 per share, 501-1000 = $120 + $0.06 per share, 1001+ = $150 + $0.03

This actually punishes higher net worth traders… a novel approach, we have never seen this at any other brokerage.

Options
Online Trades For Options with premiums of $0.50 or less:

Contracts Dollar Amount per Contract % of Principal
0 - 49 $1.50 +1.2% of principal
50 - 149 $0.90 +1.4% of principal
150 - 499 $0.60 +1.6% of principal
500 – 1,499 $0.50 +1.6% of principal
1500+ $0.50 +1.2% of principal

* Minimum Charge - $35

Online Trades For Options with premiums greater than $0.50:

Principal Amount Flat Dollar Amount % of Principal
$0 - $2,499 $23 +1.3% of principal
$2,500 - $9,999 $39 +0.65% of principal
$10,000+ $79 +0.25% of principal

* Minimum Charge - $35
* Maximum Charge - $64 for 1st two contracts, plus $3.20 per contract thereafter.

Good Until Cancelled Orders - Subject to more than 1 commission charge if order is not fully executed on the same business day.

Representative Assisted Trades
Representative-Assisted Options trades are charged an additional 25 percentage points of commission over the online fees and commissions listed above.

Mutual Funds
No-Load No-Fee Funds = $0.00 Merrill Lynch Directs, No commissions or transaction frees charged by the Mutual Fund or Merrill Lynch Direct. We asked for the total # of No-Load No-Fee funds during each call and no rep was ever able to answer the question.

No-Load Funds = .75% of gross proceeds with a $50 minimum and a $250 maximum. We asked for the total # of No-Load funds during each call and no rep was ever able to answer the question.
Load and Fee Funds = Fees charged by mutual fund and possibly by Merrill Lynch Direct as well.

Tip: Avoid any funds with loads or fees. With the vast selection of no-load no-fee offered by many of today's online brokerages, there's no reason to ever pay them!

Treasuries & Bonds
Treasuries at auction, Bonds & CDs: Price and Yield as quoted, Merrill Lynch acts as the principal.

Rates & Fees
Margin Rates: Tiered structure with the lowest tier, < $25,000 = 9.375% and the highest tier, $10,000,000 = 5.25%

Checking Available? Yes
Paper Statements: $5.00
Electronic Statements: Free
Quarterly Account Fee: $25 per quarter unless your account is > $25,000
Wires: $35

Section 3: Customer Service Rank

Phone Reps
Wait times aren't that long but call transfers and holds while a rep does research are way too common. This can lead to disconnects, having to repeat your question or problem, and extended wait times. You may wind up talking to several different employees and managers to get something as simple as an account fee question answered.

We were also surprised to learn that Merrill Lynch Direct customers are only supported 8AM to 7PM Mon-Fri EST while other Merrill Lynch services offer 24 hour support. This makes it seem like online self-directed customers take a back seat to everything else at Merrill Lynch.

Fees… This last item generates a lot of customer dissatisfaction so customer service seemed a better place to talk about it than Rates & Fees. The number of complaints we found related to excessive and hidden fees concerned us. This is a common theme among Merrill Lynch complaints, so be careful and make sure you read the fine print whenever you're setting up your account, signing up for a new service, or using a Merrill Lynch product that's new to you.

Online Support
Online support needs improvement. Merrill doesn't offer live chat and if you use the email service you are more likely to receive a return call from an advisor more interested in pitching products than answering your questions.

The FAQs section isn't bad but Merrill Lynch Direct needs to develop at least one strong online support option. For now, pick up the phone if you have a question or issue and you are able to call during Merrill Lynch Direct support hours of 8AM to 7PM Mon-Fri EST.

Advanced Support (Options, Funds, Bonds, etc.)
This is an area where Merrill Lynch shines, they offer some of the best advanced support in the business. They actually encourage clients, especially those with high net worth, to contact specialty advisors directly with advanced investing questions rather than dialing the general number. This is a great perk, most online brokerages force you to go through their regular phone service and then be transferred to a specialist.

Section 4: Research Tools & Investing Information Rank

Market Research
Merrill Lynch is one of the industry leaders when it comes to research, especially if you're interested in international investing. They have 800 analysts that do research on Global equity, global economics, global fixed-income, and global investment strategy and they offer a lot of this information to Merrill Lynch Direct clients for free. We were so impressed by some of these reports that we include more detail about them in the “Perks” section below.

You will also have access to the various 3rd party research and analysis resources that have become standard at most online brokerages sites, but they will pale in comparison to the specialized and in-depth Merrill Lynch research that's available.

Level II Quotes & Streaming Data
Streaming data is available but Merrill Lynch Direct does not offer Level II quotes.

Investing Tools
Merrill Lynch offers clients the best investment research in the industry, but their investing tools aren't the same caliber. They have stock, fixed-income and mutual fund screening tools but they can only give you a long list of potential investments. Individual investors aren't offered tools powerful enough to narrow this long list down to a small group of high-potential investments in line with their strategy and risk tolerance.

Merrill Lynch Direct also gives you access to their retirement, education, and savings goal calculators but these tools are pretty generic. You can find similar versions for free at many sites that specialize in investing research or financial planning. The reason this was disappointing is because we are pretty certain that Merrill Lynch Advisors have access to MUCH more powerful research and analysis tools. Putting little effort into the self-directed investing tools provides more evidence that Merrill Lynch wants to manage your money, they don't want YOU to manage your money.

Account Summary
We were impressed with the account summary options. In addition to the regular stuff you'd expect from any online brokerage, you can also dig into the realized and unrealized gains, tax exposure, and cost basis of each investment. The most unique and interesting feature is the ability to compare your asset allocation to numerous model portfolios prepared by Merrill Lynch advisors. Each of these comparison portfolios represents a different investing strategy.

Section 5: Perks

Research
Merrill Lynch wins awards every year for the quality, depth and accuracy of their investing research. If you're interested in international investing, you may want to open a small account simply to gain access to Merrill's Global Investing Research reports. You get great information and you'll be the first to get details about new emerging markets, world economic conditions, resource and commodity opinions, and suggested allocations for assets, regions, and sectors.

Tip: These reports are difficult to find, they are not listed on the Merrill Lynch Direct site map, on any tab or even in the research section as far as we could tell. You will need to go to the Research section => Research Report => Key Word Search and then search for the report you're interested in.

Our two favorite reports were:
1. Global Research Highlights: A weekly summary of economic, investment, technical, fixed income, and quantitative strategy. This report also includes the “Focus 1” list of stock recommendations.

2. The Global Fund Manager Survey: A monthly report that canvasses the views of 300+ institutional, retail, and hedge fund managers around the world. The report provides unique information on consensus expectations for the economy and markets, as well as allocation for assets, regions, and sectors.

Section 6: Product Offerings

Retirement Accounts
IRAs, Roth IRAs and personal 401Ks

Education
529, Custodial, and Education Savings Accounts

Managed Account
Yes, this is their specialty.

Specialty Accounts
Estate, Trust, Investment Club, and Pension Plans for Small Businesses

Section 7: Security

SIPC Member
Yes. SIPC protects securities in your account up to $500,000. Merrill Lynch Direct also carries insurance over and above the SIPC protection.

Firewall Secured and Fraud Protection
Yes. All of the major sites have dependable security. They can't afford to make mistakes, they wouldn't survive a year if they gained a reputation for mishandling money or for lax security.

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