Here at Investor Junkie, we’ve been keenly following the rise of the robo advisors. These automated investment advisors use computer algorithms to determine the ideal asset allocation for your portfolio. They’re computer-based, rather than requiring a salaried professional. So they’re much cheaper than traditional advisors. This is making them a hit among young and beginning investors in particular.
We’ve noticed that some of the big names among stockbrokers are introducing their robo-investing services. If you want to invest on autopilot, this is certainly excellent news.
But is this model the wave of the future? We think so. And that’s why we were excited to see that Merrill Edge had launched its own robo advisor platform called Merrill Edge Guided Investing. We gave it a test drive. Here’s what we found.
What Is Merrill Edge Guided Investing?
Merrill Edge Guided Investing — MEGI for short — is the robo advisor platform for Merrill Edge. It’s a relative newcomer in this space, having been launched in January 2017.
Merrill Edge itself was launched in 2010 as part of the Merrill Lynch family, which traces its founding back to 1914. (Merrill Lynch was acquired by Bank of America in 2009.) That makes the company one of the oldest and most widely respected investment brokerages in the country.
As is typical with robo advisors, your portfolio is professionally managed. This includes everything from initial portfolio allocation through regular rebalancing. Once you sign up for the service, your only requirement is to regularly fund your account.
MEGI can be used for both retirement and general investment accounts. You can even set up several accounts for each investment goal that you have. MEGI uses many of the commonly recognized robo advisor strategies. But there are a few departures that make this service stand out from the crowd.
|Fees||0.45% - 0.85% per year|
|Tax Loss Harvesting|
Daily, Weekly, Biweekly and Monthly
|Customer Service||Phone: 24/7; Live Chat: 24/7; Email|
What Merrill Edge Guided Investing Offers
If you're thinking about using Merrill Edge Guided Investing to put your money to work, here are the main features this robo advisor offers.
MEGI is similar to other robo advisors when it comes to the basics. When you sign up for the service, you complete an application that establishes your investment goals, your time horizon, and your risk tolerance. You complete a short questionnaire (five questions) designed to measure that tolerance.
Your entire portfolio is invested in low-cost, index-based ETFs. Those ETFs are primarily from the Vanguard and iShares families. There is no use of in-house funds from either Merrill Lynch or Bank of America.
There are several areas where MEGI departs from the robo advisor norm.
Firstly, MEGI isn't algorithm based. Instead, it uses a combination of proprietary software and human investment strategies. Those strategies are developed by the Global Wealth & Investment Management Chief Investment Officer but actually managed by Merrill Lynch affiliate, Managed Account Advisors, LLC.
MEGI is not a passively managed portfolio either. The ETFs used in portfolio construction are index-based and therefore passive. But which ETFs are used is actively managed by the management team. We can think of it as active management of passive investments.
MEGI bases changes in the ETF portfolio on tactical strategic shifts. Management invests in specific asset allocations but will make changes in those allocations based on changes in the market. For example, if management believes that European stocks will outperform U.S. stocks, it will shift the portfolio in favor of European stocks.
Unlike typical robo advisors, MEGI provides an opportunity for the investor to outperform the market, not merely match it as other platforms attempt to do. And since it is Merrill Lynch, a company well known for customer service, investors will have access to the Merrill Lynch Specialty Team. This provides an important human touch to an otherwise automated investment service.
Portfolio rebalancing is done on an as-needed basis and is based on market conditions. This is a must-have for robo advisors these days, and MEGI includes it free-of-charge for all portfolios.
Socially Responsible Investing
One of Merrill Edge's main competitive advantages over many online brokers is that it offers exceptional research and SRI options. MEGI is no different, and it lets you invest in SRI and ESG portfolios so you can feel good that your portfolio is considering the environment and social wellbeing.
Human Advisor Access
Merrill Edge Guided Investing has two plans: one that's online-only and one that also lets you work one-on-one with a human advisor. This flexibility is nice to see, although working with an advisor requires investing at least $20,000 and increases annual fees, which I'll cover down below.
Bank of America Preferred Rewards
Since Bank of America owns Merrill Edge, MEGI customers can benefit from the Bank of America Preferred Rewards Program. This free program includes perks like:
- Discounts on Merrill Edge Guided Investing annual program fees (up to 0.15% off)
- Bonus credit card rewards
- A higher interest rate for the Bank of America Advantage Savings account
- Better foreign currency exchange rates
|3-Month Average Balance Requirement||$20,000 to $50,000||$50,000 to $100,000||$100,000 to $1M||$1M to $10M|
|Guided Investing Discount||0.05%||0.10%||0.15%||0.15%|
|Advantage Savings Interest Bonus||5%||10%||20%||20%|
|Credit Card Rewards Bonus||25%||50%||75%||75%|
|Foreign Exchange Rate Discount||1%||1.5%||2%||No international transaction fees or ATM fees|
The guided investing discount is the most relevant perk here, although you only get a 0.05% discount if your balance is between $20,000 to $50,000.
Sign Up Bonuses
MEGI is currently offering a sign-up bonus for new accounts. The bonus is based on a sliding scale, as follows:
- Open an account with $20,000, get a $100 bonus.
- $50,000, $150 bonus.
- $100,000, $250 bonus.
- $200,000, $600 bonus.
The bonus will be paid on brokerage accounts, as well as traditional, Roth and rollover IRAs and sole proprietor SEP IRAs. You must fund your account within 45 days of opening it. The minimum qualifying balance must also remain in your account for 90 days after opening. The bonus will be paid two weeks after the 90-day limit has been reached.
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There is no mobile app specific to MEGI, but you can track account balances on the Merrill Edge mobile app. The app also lets you track accounts that you hold with Bank of America. The app is available for iPhone and Android devices and offers Touch ID for faster access.
MEGI Pricing and Fees
The annual advisory fee for your account is 0.45% on all balances for the online-only version of Merrill Edge Guided Investing. If you want the online option with advisor support, you pay 0.85% in annual management fees.
The fee is charged monthly and in advance. In addition, sales trades are subject to a transaction fee of between $0.01 and $0.03 per $1,000 principal. There are also fees charged within the ETFs themselves. However, there are no trading fees like most other commission-free brokers.
As mentioned, you can get annual fee discounts through Bank of America's reward program, but discounts require investing at least $20,000 to take effect.
The Merrill Edge and Bank of America Connections
One of the built-in advantages of investing with MEGI is that it gives you access to services from both Merrill Edge and Bank of America.
Merrill Edge is one of the better-known full-service investment brokerage platforms. It can provide an opportunity for you to participate in self-directed investing, along with automated investing through MEGI. Fees are in the middle range, at $6.95 per trade for stocks and ETFs. But this includes access to the very extensive Merrill Lynch library of investment research and investor education.
Bank of America (BofA) is a full-service bank. It offers checking and savings accounts, certificates of deposit, auto loans, home mortgages, credit cards, student banking, small business banking and Health Savings Accounts (HSAs).
As one of the nation’s largest banks, BofA has bank branches in most states. This means you have easy access to ATMs and other services. But even more important, there are more than 2,000 financial centers around the country. Each one is staffed with a Merrill Edge Financial Solutions Advisor who can provide you with face-to-face contact for your investment activities.
If you have accounts with MEGI, Merrill Edge and Bank of America, you will be able to view your balances for all three accounts from the same interface. It will also give you the ability to move money effortlessly and immediately between the three platforms and without the need to log into each one individually.
How to Open an Account With MEGI
You can create a portfolio allocation with MEGI before you even open an account. This will give you an opportunity to see what MEGI can do for you before becoming a customer and committing funds.
This signup is a four-part process:
- Establish your investment goals (retirement or general investing).
- Determine your risk tolerance, which will require answering five questions.
- Review the investment strategy provided for you.
- Open your account, if you’re satisfied with the results.
If you already have an account with either Bank of America or Merrill Edge, you can simply transfer funds from that account into your MEGI account. If not, you can set up a wire transfer or ACH from an outside account.
Some of the input screens have sliders that let you adjust the numbers that you input. For example, you’ll be asked:
- How much do you want to invest? (The minimum is $1,000.)
- How much do you want to contribute each month toward your goal(s)?
- When is the earliest you’ll want to withdraw money from your MEGI account?
Based on your risk tolerance, goals and investment horizon, the investment strategy will generate a tailor-made asset allocation.
You can call customer support 24/7 at 888-637-3343, which is one advantage of using Merrill Edge.
Pros & Cons
In terms of reseach and ESG investing options, Merrill Edge is one of the best brokers out there. And its more active management means its robo advisor has the potential to outperform the market.
That said, the starting 0.45% annual management fee is a major downside. Many competitors are fee-free or have much lower annual fees than MEGI. Here are some of them you might want to consider:
|Minimum to Open Account||$10||$500||$0|
|Advice Options||Automated, Human Assisted||Automated||Automated|
|Socially Responsible Investing|
Betterment and Wealthfront are two leading competitors with lower fees and minimum investment requirements than MEGI. Betterment also has excellent ESG portfolios while Wealthfront gives you more customization options over specific ETFs in your portfolio. As for M1, it's a hybrid robo advisor and broker you can try that's also fee-free.
The biggest disadvantage with MEGI is the advisory fee. At 0.45%, this is well above standalone robo advisors Betterment and Wealthfront, each of which has a fee of 0.25%. Wealthfront even manages the first $10,000 free.
But even among other brokerage firm-sponsored robo advisors, MEGI is a bit on the high end of the fee scale. For example, Fidelity Go charges 0.35% on retirement accounts and no more than 0.40% on taxable accounts. Meanwhile, Charles Schwab Intelligent Portfolios charges no management fee at all.
On the surface, the fee structure does look high. However, MEGI involves active management of your portfolio. So management can reduce riskier asset allocations during a general market downturn. This minimizes losses compared with the platforms that are strictly passive. This advantage could become more pronounced in a prolonged bear market and more than offset the higher fee.
The lack of tax-loss harvesting could be another issue. It has become a common feature with many robo advisor services, including Betterment and Wealthfront. This won’t be an issue with retirement plans or for smaller investors. But it may cause larger investors to shy away.
MEGI may work best for people who already have accounts with Bank of America and/or Merrill Edge. It will allow them to invest where they bank or to add an automated investment component to their other investment activities.