Sunday, January 2, 2011

Good Bye, Merrill Lynch

Back in May, I managed to save up 6 months of living expenses for an emergency fund, so I looked to open an online self-directed individual trading account to get some trading experience (and maybe some extra income). I searched for online discount brokerage firms with low fees by looking at Sharebuilders, Scottrade, E-Trade, etc. In the end, though, I settled on Merrill Lynch.

This wasn't because Merrill Lynch was ranked the highest by reports or provided the best services. The main reason was because I do a majority of my banking with Bank of America. After being bought by Bank of America in mid-2008, Merrill started advertising a $0 equity trading program pretty agressively in 2009. Of course, $0 comes with some restrictions. You need to have at least $25,000 combined in your deposit accounts at Bank of America (savings, checking, CD's, etc.) and you can only trade free for up to 30 trades. Otherwise, the price structure is based on your deposit total, with the highest fee being $8.95 per trade.

I didn't have a combined $25,000, but the fee was low enough to be competitive with most online discount brokerage companies. The account would give me the convenience of being able to manage it online along with all of my other BofA accounts. Plus, there was an incentive for me to save more in order to reach the $25,000 mark to get $0 trades. I was convinced.

Not too long ago, I received a letter informing me that Merrill will start charging an account maintenance fee of $25 per quarter starting in 2011 unless you maintain a balance of $50,000 in your combined Bank of America accounts. Ridiculous! It's the age of low brokerage fee. Last January, Charles Schwab announced that they were lowering their online trading commissions, sparking a price war between online brokers. Surely I can find somewhere else to park my money with lower commissions and no maintainance fee. Besides, Merrill hadn't been anything special. I won't be getting anything extra out of that $25, so why pay?

I finally got my act together and called them about a week ago to confirm that they will be enforcing these fees. I found out that if I close my account, I can just get all of my money transfered back to a BofA account of my choosing. If I transfer the account to another broker (so I get to keep the stocks I own), it'll cost me $95. Keep in mind that some brokerage firms will cover the transfer charges if you open a new account with them. I ended up selling all of the positions in the account and closed it. It was mainly because I haven't decided what I wanted to do with this money or which brokerage firm I will go with. Luckly I did not lose any money.

It's odd that Merrill's adding more charges as other brokers are cutting them. In a recent Kiplinger's article, they were ranked the highest in "annoying fees." I'm inclined to attribute Merrill Lynch's fees to a move back to their roots as a traditional brokerage, which serves clients with higher income/assets. They are probably trying to weed out the rest of us. Oh well, good riddance. Anyways, I'm still in search of a new discount brokerage firm. I will be sure to share my research and decision with you!


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