Taking advantage of a Department of Labor Advisory Opinion issued last December (see  DoL Lowers Another Advice Barrier ), Merrill Lynch has engaged Ibbotson Associates to develop independent financial models, which will determine the most desirable asset allocation recommendations for individuals based on their goals and the specific investment options within their company retirement plans.  

The DOL opinion essential sanctioned the ability of a investment manager to be paid for offering participant-specific investment advice, as long as the specific fund recommendations were derived from an independent source, such as Ibbotson.   Merrill says it will be offering these services as a co-fiduciary.   

Net “Difference”

Mark Feuer, Chief Operating Officer of Merrill Lynch’s Retirement Group notes that “net only” investment advice is not widely used, at least in part because participants have different interests, needs and abilities.   Through the AdviceAccess program, participants in plans serviced by Merrill Lynch will be able to obtain plan-specific investment advice through a local Merrill Lynch Financial Advisor, an Advisor at the Merrill Lynch Financial Advisory Center, or through the firm’s Benefits OnLine web site.  

Additionally, Merrill Lynch AdviceAccess will use the same underlying financial planning tools as those used by Merrill Lynch’s Financial Advisors to serve private clients, according to Participants will also be able to obtain financial advice based on all their total assets, not just those in their retirement plan, if desired.

Pricing and the method of payment for access to the service are still being worked out, according to Feuer, who noted that Merrill’s goal was for the advice to be “flexible and available to workers”, specifically the 2.5 million participants currently on Merrill’s recordkeeping platform.   Merrill has an existing alliance relationship to offer access to financial advice through online advice provider Financial Engines.   Feuer said that relationship would continue.

Contact Points

Access to the new advice platform will be strictly voluntary on the part of participants.   “Participants will be contacted only if the participant asks to be contacted,” according to Feuer.   Merrill is considering a variety of means for the participant to request access to the platform, which will be discussed with adopting employers.

Merrill also noted that an automatic enrollment option would be available alongside the new advice offering.   Typically in such cases an employer advises employees that a portion of their pay will automatically be deducted from their paychecks and deferred into the retirement plan, unless the worker specifically opts out.   Those funds are frequently invested in a “default” investment option, typically a money market or some other stable value option, so as to minimize risk of loss.  

The Merrill program would provide a more thoughtful investment choice, one based on asset allocation models developed based on information about the worker – age, average compensation, etc., according to Feuer.  

AdviceAccess will be released in a test phase to selected clients in 2002, and will be more broadly available in the first quarter.

The Merrill Lynch Retirement Group is responsible for assets in excess of $307 billion for 5.6 million individuals, and services over 16,000 workplace-based retirement programs.