Merrill Edge, Bank of America Corp.'s online brokerage, isn't faring well in surveys that pit it against well-established competitors.
The service, supported by call centers and the bank's branches, came in last in a J.D. Power and Associates study released June 30 on self-directed investor satisfaction, and it also has ranked low in earlier surveys.
Bank of America's full-service brokerage, Merrill Lynch, runs the risk of seeing its reputation weakened by the new venture, particularly if it isn't well executed, analysts have said. But the analysts also said Merrill Edge deserves a little more time to prove itself: The business was officially launched only in January, although it was introduced a year ago.
"There is a degree of ramping up, and the other competitors have been out there for a long time," said David Lo, director of investment services at J.D. Power.
In J.D. Power's survey of 4,274 investors, Merrill Edge scored low on all factors studied: interaction, account information, trading charges and fees, account offerings, information resources and problem resolution, J.D. Power said. Merrill Edge had an overall score of 691 out of 1,000, putting it last out of 11 companies. The average score was 764, and the top score of 831 went to USAA.
In March, a survey by Barron's put Merrill Edge near the bottom among online brokers, and a June SmartMoney ranking put Merrill Edge in eighth place out of 10 discount brokers. Barron's and SmartMoney are both owned by Dow Jones & Co., which also owns Dow Jones Newswires. Barron's praised Merrill Edge's "huge focus" on retirement planning, the availability of global research and the deal for 30 free equity or exchange-traded fund trades per month with $25,000 or more in the client's Merrill Edge or Bank of America account. But Barron's said Merrill Edge had cons such as the need to call a live broker to trade bonds, very little customizability and confusing pricing tiers. SmartMoney was also negative on the pricing structure at Merrill Edge, saying extra fees put the business at the pricier end of the spectrum among its peers. (Merrill Edge says later in the year clients will be able trade bonds online.)
Merrill Edge targets so-called mass-affluent consumers, or clients with assets of $50,000 to $250,000. It gives them a place to manage their investments other than Merrill Lynch, which is aimed at higher-end clients.
At the end of March, assets in the roughly 1.5 million Merrill Edge brokerage accounts totaled $66.7 billion, a 4.9% increase from yearend. The broad market strength was a factor, but the increase "has primarily been driven by strong organic growth," the company said a few months ago.
Asked about the J.D. Power survey, a Bank of America spokesman said July 1 that "Merrill Edge is committed to offering investors clarity, transparency and an exceptional customer experience." Merrill Edge is one of the few platforms in the online brokerage industry that give customers a choice of personalized advice in addition to a self-directed online investing platform, the company said, adding that it "continually monitors customer satisfaction." The spokesman didn't directly address the J.D. Power survey results.
Aite Group analyst Alois Pirker said he was surprised to see Merrill Edge's low ranking, and attributed it to the operation's youth. "They're still in build-out mode," he said. Mike Ellison, the president of the consulting firm Corporate Insight, also was surprised. Based on his firm's analysis, Merrill Edge stacks up well against its competitors based on usability and capabilities, he said.
