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Merrill Lynch upgrades planning technology, encroaches on independents’ turf

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Wirehouses are setting their sights on digital financial planning, and it could erode one of independent advisors’ biggest competitive advantages.

Merrill Lynch’s latest update to its technology brings together two traditionally separate tools, planning and investment proposals, into a single digital workflow the firm calls Personal Wealth Analysis. Without needing to switch programs, print any forms or manually re-enter information, advisors can seamlessly move from discussing a client’s goals to setting a target allocation for each goal, according to the firm. PWA will illustrate in real time how adjusting investments can affect the plan, or how changing the parameters of a financial goal will impact the investment strategy.

“So the client can see right on the same screen, if I make this decision to change my allocation or change my spending level, or whatever, this is the direct and immediate impact it has,” says Rob Durante, head of wealth management tools for Merrill Lynch Wealth Management.

The technology is about 90% proprietary and uses LifeYield for some tax and social security optimization capabilities, Durante says.

By solving one of advisors’ biggest pain points — moving data between planning and investment platforms — PWA establishes Merrill as an industry leader in digital financial planning, says Alois Pirker, research director at Aite Group’s wealth management practice. It could also help Merrill’s 17,000 financial advisors embrace goals-based planning.

“The integration of that planning function into the general advisor workflow is giving [wirehouses] a much broader rollout of the planning discipline across the field,” Pirker says.

Merrill Lynch isn’t the only wirehouse trying to make planning easier for its advisors. Morgan Stanley’s Goals Planning System plays an integral role in WealthDesk, its next-gen advisor tech platform. The firm was unable to provide additional comment on its planning capabilities for this article.

Kim Ta, head of client service and advice for Wells Fargo Advisors, says planning is a hallmark of client relationships, with 10,000 advisors currently providing active plans with its proprietary software, Envision.

“Wells Fargo Advisors has been in this space for a very long time, and we’re proud of that,” Ta says. “I don’t think anybody has that [planning] market cornered.”

While fee-based planning is still considered the purview of RIAs and wirehouse advisors are often portrayed as sticking to brokerage services, the reality is that the line between business models is blurring, Pirker says. Brokerage firms have dramatically grown their fee-based business, and client assets tend to be evenly split between brokerage and managed accounts.

This could become a challenge to the independent channel as large institutions leverage resources and brand recognition to offer services like planning that historically differentiated RIAs. Indy advisors can still target specific client demographics with specialized services, but they’ll struggle to match the integrated ecosystem firms like Merrill are rolling out, Pirker says.

“RIAs are further down the fiduciary track, no question about it, but they’re not operating as efficiently as [advisors] are at Merrill,” he says. This could also play a role in stemming the tide of breakaway brokers who would otherwise “miss that efficiency.”

Durante says planning has been a “way of life” at Merrill for at least 10 years, especially for younger advisors. Merrill’s training program instructs newcomers in a goals-based approach that connects investment strategy and products to a financial plan using the firm’s proprietary technology, he says.

Brian Partridge, head of investment solutions group specialists at Merrill’s parent company, Bank of America, says the firm is increasing the number of CFP-credentialed advisors in its workforce. The firm says it currently employs more than 4,000 CFPs.

Veteran brokers unaccustomed to planning are encouraged to add CFPs to their team, Partridge says. More than 80% of Merrill Lynch advisors are on a team, the firm recently said.

The shift to teams isn’t about improving financial planning, it’s a strategy to prevent advisors from going independent, XY Planning Network co-founder and Financial Planning contributor Michael Kitces says in an email. But the issue with financial planning at wirehouses is advisors using the service to sell proprietary investment products, he says.

“The criticism isn’t the means,” Kitces says. “It’s the ends — planning for a product sale, versus planning for the sake of being paid for the advice itself.”

Ta says Wells Fargo Advisors’ is open-architecture with investment managers and does not include product implementation on its planning platform. “There is no line from plan to product,” she says.

PWA does make it easy for advisors to implement an allocation strategy designed by Merrill, but advisors can also build a custom allocation using third-party investment products, Durante says. A set of search filters will screen products for best possible matches, and advisors can quickly see how it would align with a client’s goals and risk tolerance.

Merrill also does not charge for planning and can offer these services to prospects for free, Durante says.

Kitces says that integrating data between financial planning and other technology continues to be a pain point in the independent space. Innovations from planning software vendors like eMoney and MoneyGuide benefited independent advisors over the last 20 years, but a deeply integrated, proprietary system could give the advantage back to the wirehouses.

“So a wirehouse ‘home growing’ its own planning software again, 1990s-style but with modern systems and capabilities, would be a big deal for technology evolution in our space,” Kitces says.

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