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Merrill Edge not very mutual fund friendly

For some investors, such as ones who are interested primarily in stocks or ETFs, this may be a fine brokerage. But Merrill Edge doesn't seem to recognize that mutual funds are something different.

It seems to be stuck in the 80s, before fund supermarkets existed and when brokers processed trades only in whole shares. WIth Merrill Edge, one cannot specify a fractional number of shares of a fund to sell. One cannot transfer fractional shares, even between internal ME accounts (e.g. for a Roth conversion). Monthly statements report positions in whole shares, though the fractional amount does appear as a note in the position description as if it were the result of a DRIP purchase.

Even the way it handles closing out a position feels like the way an ETF or stock position might be handled. From a recent communication with ME:

"If you transfer all whole shares of a position out of your account, the fractional shares should liquidate automatically during the third week of the month. This is contingent upon the aggregate sum of fractional shares in our inventory being sufficient to total at least one whole share."

Once a month!? If you're lucky? Sounds like Sharebuilder's investment plan that trades only on Tuesdays.

It lists many funds having a $0 min for additional investments, but the website does not accept amounts under $1. For stocks that trade in whole shares, that doesn't matter (except for penny stocks, and ME blocked a test trade of the penny stock SHLDQ). But it does matter for mutual funds that trade with a granularity as small as one cent.

In one sense (dollars involved) none of this is a big deal. In another sense it's significant - rather than making mutual fund operations easy, it forces the investor to conform to its way of handling mundane requests. That's not fund-friendly.


  • yeah, you are right. i do have a brokerage account with them though and hold some funds through them.
  • edited January 2019
    Yup, they are oddly unsophisticated, and in important ways, I think.

    If ML were not hardwired w/ BoA (where we have checking / savings / mortgage / heloc / 3% credit card sort of), and above all did not have free trading, and did not pay so much for accounts transferred into them (I guess the same as other places, turns out), I would move everything back to Fido.

    Also, fwiw, ML's accounts aggregator, My Financial Picture, is invariably accurate, while Fido's has been sketchy for about a decade, even as they changed from yodlee to other data feeds, and earnestly promise improvement every other month. I have a dozen emails about FullView and My Portfolio update problems. Still laggard and/or wrong, almost every night.

    There is worse, too, in just trying to ascertain whether you can buy a given fund --- it shows availability right up to the moment you make the actual purchase attempt. And the capper for me is their restriction list, already covered in this forum, notably for me CAPE unavailability.
  • Right... I only use Merrill edge for free trades for stocks ETFs since got boa and 3%discounts w credit cards
  • Thanks for the suggestion on My Final Picture - I'll take a look at it.

    Generally, my experience with brokerages attached to banks is that they are clunky and have limited offerings. If an account gets me a perk I value (like boosted credit card rewards), I'll dump in some holding that I expect to leave untouched for years.

    I dropped WellsTrade when it got so difficult to figure out what they sold that it wasn't worth it to me, even at $0/fund trade, to keep the account. What surprised me now with ME was their idea that they couldn't sell fractional shares back to the distributor, so they only redeem fractional shares on their books monthly. Talk about unclear on the concept.

    Aside from not offering ETNs (a form of debt), ME also doesn't offer new issues of bonds, except Treasuries if you want to pay $30 to go through a rep.

    Which gets us back to what we all agree this account is good for - ETFs and stocks. And credit cards.
  • all noted, tnx

    The thing is, this was not ever supposed to be a 'brokerage attached to a bank', but the bfd result of a long-established independent brokerage marrying a big ol' bank, with all the joy-joy of each and both...

    I forgot about CAPE not paying dividends (etn meaning debt instruments) --- so all the DSE_X divs come from the bond sauce. Huh.

    Yeah, the end-month fractional sweep thing is also nuts.

    BoA credit cards don't need ME/ML brokerage, I think, though you probably get extra-nice treatment or something if you have a lot of bucks at the brokerage.
  • Merrill Edge was always a supposed to be a brokerage attached to a bank. It is essentially a 2010 rebranding of what used to be Banc of America Investment Services' discount services.
    BofA actually had an existing online brokerage, but re-branded it under the Merrill Lynch name--which the bank acquired in 2009--to leverage the combined entity's brand equities.
    You can find rankings for the old Banc of America brokerage in this 2009 AAII listing of discount brokerages. It mentions briefly that the brokerage's fee structure was in the process of being overhauled:

  • meh, of course I meant Merrill Lynch Pierce et alia, which goes back way far, as you doubtless know and which was as noted above agreed-acquired in famous Sept '08 and completed the next year.

    That was the bfd, one of them, at the time, and BoA made much about it to existing customers.

    On my ME tax forms, and likely on yours, it always says Merrill Lynch, the same as it did for my grandfather in the 1950s. That was all I meant.
  • “What's in a name? that which we call a rose By any other name would smell as sweet.”

    Or in this case, stink as much. One can slap a Merrill Edge name on Banc of America, it's still a bank brokerage, conceived by a bank, launched by a bank, and (re)branded by a bank, multiple times.

    NCNB Securities (the NCNB is for North Carolina National Bank) was created in 1986. It was rebranded NationsBanc Securities (when NCNB rebranded itself NationsBank), then NationsBanc Discount Brokerage, then NationsBanc Investments. After NationsBank Merged with Bank of America, it took on the name Banc of America Investment Services.

    "On my ME tax forms, and likely on yours, it always says Merrill Lynch, ... That was all I meant".

    You meant that a brokerage (now called Merrill Edge), attached to a bank since its creation in 1986 "was not ever supposed to be a 'brokerage attached to a bank'" because it was renamed after a formerly independent brokerage?

    You conflated two different entities, Merrill Lynch and Merrill Edge. I suggest leaving it at that, especially since efforts to explain this away seem to make matters worse.

    Consider your assertion that this "Merrill Lynch Pierce et alia ... goes back way far". This is both irrelevant and misleading. Irrelevant because it wouldn't matter how long Merrill Lynch was an independent brokerage, whether for a day or a century.

    Misleading if not erroneous, because (check your own citation here), in your grandfather's 1950s, the brokerage was known as Merrill Lynch, Pierce, Fenner & Beane. Since then, it has been known as Merrill Lynch, Pierce, Fenner & Smith. A fact that I doubtless have known since university when a classmate of mine mentioned it to me.

    Regarding documents from ME, my account statements say "MLPF&S". "S" as in "Smith." While I don't know what was on your grandfather's statements, it was certainly something different.
  • I just checked how Merrill handles mutual fund tax lots. Its inability to handle fractional shares results in its doing backward somersaults to get the numbers to add up right. Fictitious lots are thrown in with phony prices. A single fund purchase of mine is shown as three different buys on the same date, all with different prices!

    These cascading "rounding errors" result not in a difference of a penny here and there, but tens of dollars in costs for various lots. One cannot inform Merrill of cost basis errors online, one must submit a paper form.

    Nor is it possible to specify online which fund shares to sell. (You can do this at Merrill with stocks/ETFs.) Even at Vanguard (the brokerage everyone loves to hate) one can sell specific mutual fund shares online. Of course, Vanguard understands mutual funds.

    And that paper form dated 2019? It highlights (italicizes) the following incorrect information:

    NOTE: The information contained in the Capital Gain and Loss section of your annual tax statement is provided by Merrill Lynch as a value-added service and is not furnished to the IRS. The IRS has several approved methods for calculating cost basis. The calculation method you choose will affect the amount of the taxable gain or loss reported for the year. You are being required to specify the method you have elected to use on your tax return. Once a method is selected, that method must be used for all shares held in the security. To change the method, the approval of the IRS is required.

    The parts I underlined are wrong with respect to covered shares.
  • A not so brief followup. I sent Merrill a set of questions given all the processing in my accounts. It took a week, but I did get a response which was more a reiteration of what happened than an explanation. Whatever. Here are some excerpts:

    (Merrill online counts TTTXX MMF as cash available to trade online even though they don't automatically redeem the fund; what happens if you actually place a trade w/o selling the fund):
    For fund held in TTTXX, this amount may still show as available to invest ... online due to this fund being considered a cash equivalent. However, if you place a trade using the funds held in TTTXX, it would be necessary to deposit funds into the account or liquidate shares of TTTXX to make funds available before the trade settlement date.
    But what happens if I don't place an order to sell TTTXX? Not answered. No explanation as to why this MMF shows up as cash while others don't.

    (BPTXX MMF divs reinvested in fund even after I closed the position:)
    if there were pending dividends set to be paid, the dividend received would be paid based on your previous reinvestment options selected for that fund
    It goes on to say that I could change my reinvestment options to prevent this from happening. At other brokerages, when I close out a position, the trailing divs go to cash (if position liquidated) or follow shares (if transferred in kind).

    (Reinvesting dividends in MMFs and bank sweep accounts:)
    money market mutual funds will typically reinvest fractional amounts while bank deposits or money funds like TTTXX or the ML Direct Deposit Program are only able to reinvest in whole dollar amounts.
    OMG. "Money market mutual funds" get all their divs reinvested, but "money funds" like the money market fund TTTXX only reinvest whole dollar amounts?

    ML Direct Depost Program (MLDPP) is the BofA sweep account for taxable Merrill accounts. Apparently bank accounts like the MLDPP credit only whole dollars of interest. What real bank refuses to credit pennies of interest back to your account? Is BofA a real bank?

    The response goes on to say that for IRAs, the equivalent sweep program is called "Bank of America NA RASP". The problem is that in my IRA, my one penny of interest was credited to the bank account. So what is different between the two BofA sweep accounts? Is this RASP program not like MLDPP?

    (Wrong cost basis as described in previous post:)
    when transferring securities from another firm, this information is updated based on the information provided by the other firm.
    Blame the other guy. Who do you think got the cost basis wrong, Merrill or Schwab (the other firm)?

    (Roth conversion form was submitted 5/29; still not processed):
    due to high volume of requests it has not yet been reviewed.
    I submitted a substantially identical form on 12/18/2018 and it was processed in two days. Who knew that the run up to Flag Day was a busier season than end of year for Roth conversions?

    Almost needless to say, once I get the cost basis corrected (if I can) and receive my bonus for transferring in the taxable account, I'll be transferring it out. I expect to convert my full T-IRA account at Merrill to a Roth where I will let it sit. I plan on no activity, no other accounts remaining.

  • Thanks @msf
    Past a burp here and there reported for some folks; we remain pleased to have associated with Fido in the 70's and remain there.
  • msf
    edited November 2019
    An update on my status and that of Merrill Edge.

    Until a few months ago, Merrill Edge was tracking mutual fund lots incorrectly (See April 28th post, above.) I sent Merrill a request to correct the figures. Its response was to rejigger the numbers, keeping all the lots as whole shares (instead of precise decimal numbers), while rearranging the fictitious lots and giving them changed fictitious prices.

    So then I wrote the SEC. In the meantime, I transferred my taxable account to Fidelity. Merrill sent the fictitious data to Fidelity along with the shares. Upon the SEC forwarding my inquiry to Merrill, as a courtesy Merrill updated Fidelity with the correct share quantities and prices.

    Merrill noted in its response to me that it had improved its system - it could now track fractional mutual fund shares. While the response described how the jiggering mechanism worked, it was silent about how this mechanism managed to jigger two different sets of records. They couldn't both be correct, could they? (In point of fact, they were equally wrong.)

    Merrill likely recognized how far behind the industry it was. It has not touted this "upgrade" the way a provider making a real improvement would. Nor has it corrected its customers' accounts (it only sent the corrections to Fidelity). Perhaps because that would have made account holders aware of its data fudging?

    Merrill may now be able to track fractional shares of a mutual fund, but a customer still cannot enter a sell order with a fractional number of shares. As with stocks, the only way to do that is to "sell all". When you do that, you get the message:
    Quantity: The quantity entered results in fractional shares remaining for the symbol entered. The fractional position will be liquidated post settlement.
    Yeah, right. Despite the "upgrade", one still cannot specify lots online when selling mutual funds.

    All told, I am never, ever going to keep a taxable account at Merrill again. I'll keep enough in an IRA there to get credit card perks, no more. And I'm moving holdings in that IRA to ETFs. Even in an IRA where tracking is unnecessary, I don't have faith in Merrill's ability to handle MF transactions well.

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