Merrill Edge Guided Investing Expert Review
by Contributing Columnist, Kevin Mercadante
Most robo-advisors do little more than track the general financial markets. But Merrill Edge Guided Investing, or MEGI for short, is for you if you’re looking for a robo-advisor that actively attempts to outperform the market.
MEGI offers all the services of other robo-advisors, including creating your portfolio and managing your investments through periodic rebalancing and automatic reinvestment of dividends. But they also shift your investment allocation as they feel it necessary to take advantage of changes in the markets.
MEGI also offers the advantage of being part of Merrill Edge, which offers full service investing at discount pricing. You can have an account where you do self-directed investing, while maintaining a percentage in a MEGI account where it will be professionally managed for you.
And since both Merrill Edge and MEGI are part of Bank of America, you can also do your banking with the same family of companies where you invest. It’s one-stop financial management at its best.
Merrill Edge Guided Investing Robo-advisor Features at a Glance
|Overview||Automated investment management robo-advisor platform using active management, a mix of proprietary software and human investment guidance|
|Minimum Investment Amount||$5,000|
|Fee Structure||0.45% of AUM; there is also a fee of between $0.01 and $0.03 per $1,000 on transactions within your account.|
|Top Features||Active account management that attempts to outperform the general stock market, and not just match it; connection with both the Merrill Edge investment brokerage and Bank of America.|
|Contact & Investing Advice||Available by phone, live chat and email 24/7|
|Investment Funds||Low cost, index-based exchange traded funds (ETFs) primarily from the Vanguard and iShares fund families.|
|Accounts Available||Individual and joint taxable accounts; traditional, Roth and rollover IRAs; solo 401(k)s and regular 401(k)s; SEP and SIMPLE IRAs; custodial and 529 accounts.|
|Promotions||Sign on bonus of $100 to $600 when you open a new account with between $20,000 and $200,000+.|
What Differentiates Merrill Edge Guided Investing from Competitors
Unlike most robo-advisors, MEGI isn’t fully algorithm based. That means it’s not a purely passive investment platform. Instead, it uses a mix of proprietary software and human guided investment strategies. They do make use of low cost index-based ETFs, which are passive by their very nature. But the use of those funds is managed on an active basis.
MEGI uses what it refers to as Tactical Strategic Shifts. Asset allocations are established when your portfolio is first created, but management will make changes based on shifts in the financial markets. For example, if management believes emerging markets will outperform US based stocks, they’ll increase exposure to emerging markets, while reducing the position in US stocks.
This style of investment management has the goal of outperforming the general stock market. If you prefer this type of investing to the purely passive strategies used by most other robo-advisors, MEGI Is a good choice.
MEGI is managed by Managed Account Advisors, LLC, which is an affiliate of Merrill Lynch.
Who Benefits from the Merrill Edge Guided Investing Robo-Advisor?
As noted above, one of the main advantages of investing through MEGI is the potential to outperform the market. But still another advantage is the connection the platform has with both Merrill Edge and Bank of America.
Merrill Edge is one of the better known and well-regarded diversified investment brokerage firms. The platform offers a wide variety of trading tools and educational resources for the self-directed investor. Both stocks and ETFs can be traded at a flat commission rate of $6.95 per trade.
Bank of America offers another valuable connection. It’s one of the largest banks in the country, and has branches in most US states, in addition to more than 2,000 financial centers (expanding to 2,800 by 2020). Each of those financial centers is staffed with a Merrill Edge Financial Solutions Advisor, who can provide you with assistance in your investing activities.
You can view your activity from all three accounts from the same internet platform, simplifying your financial life, and making inter-account transfers effortless.
Merrill Edge Guided Investing Robo-Advisor Drill Down
MEGI starts by determining your risk tolerance and time horizon. Risk tolerance is determined by completing a brief questionnaire (five questions), which is the typical way robo-advisors establish your risk tolerance.
Your time horizon is determined by the target year by which you plan to access some or all of the assets in your account. If you’re opening a retirement account, your retirement age will be the target year.
Your target asset allocation will include between 0% and 100% in each of 4 asset classes, including, equities, fixed income, alternative investments, and cash. Positions are held in low cost, index-based ETFs.
There are five target asset allocations:
- Moderately Conservative
- Moderately Aggressive
A conservative asset allocation will be mostly invested in fixed income assets and cash, while an aggressive allocation will be invested primarily in equities. However, asset allocations will be adjusted based on Tactical Strategic Shifts identified in the financial markets. That’s the active management part of the MEGI investment strategy.
Changes to your asset allocation can come about as a result of changes in your financial situation, time horizon, risk tolerance, or other reasons. Rebalancing of your portfolio will occur as determined necessary by investment management.
Merrill Lynch, Pierce, Fenner & Smith is the custodian for MEGI accounts.
Merrill Edge Guided Investing Robo-Advisor Sign-up Process
To open a MEGI account you must:
- Be a resident of the United States
- Be at least 18 years old
- Have a valid Social Security number
The application process takes place entirely online. As is usually the case with robo-advisors, your portfolio will be based on three factors: your investment goals, your time horizon, and your risk tolerance.
You’ll set an investment goal, either for retirement or for a general investing goal. An investment strategy will be designed by MEGI investment professionals. You’ll need to review that strategy, and determine if it’s acceptable to you. If so, you then fund your account.
You can fund your account by depositing either cash or securities. If you deposit securities, management will determine if they are acceptable within the scope of the asset allocation determined for you. If not, the securities will be sold and replaced with appropriate investments.
Merrill Edge is offering a sign-up bonus based on the following deposits:
- $20,000 or more, $100
- $50,000 or more, $150
- $100,000 or more $250
- $200,000 or more, $600
To qualify, you must open a new account. The qualifying deposit must be made to the account within 45 days of opening. You must maintain the qualifying deposit for a minimum of 90 days. The bonus will be paid within two weeks after the 90 day qualifying period ends.
Merrill Edge Guided Investing Robo-Advisor Pros and Cons
Merrill Edge Guided Robo-Advisor Pros
- MEGI offers the ability to outperform the general market through portfolio adjustments based on Strategic Tactical Shifts. The vast majority of robo-advisors work only to match the market.
- The connection with Merrill Edge means you can participate in self-directed investing on a full-service investment brokerage platform, in addition to your MEGI managed portfolio.
- The connection with Bank of America enables you to bank where you invest.
- Access to more than 2,000 Bank of America financial centers, a feature almost unique among robo-advisors.
Merrill Edge Guided Investing Robo-Advisor Cons
- The initial investment requirement is high at $5,000. Many robo-advisors allow you to start with no upfront investment at all.
- The fee structure of 0.45% is definitely high among robo-advisors. Betterment and Wealthfront charge just 0.25%. Among competing large broker robo-advisors, Charles Schwab Intelligent Portfolios has no management fee at all.
- MEGI does not offer tax-loss harvesting for taxable accounts.
Merrill Edge Guided Investing Robo-Advisor Review Wrap Up
The biggest drawback of Merrill Edge Guided Investing is the annual management fee. At 0.45% it’s on the high end of the robo-advisor fee range. However, the platform provides active investment management that holds the potential to outperform the market. Other robos can charge lower fees because they only attempt to match the market, which does not require human investment management.
The ability to outperform the market may be more important in a less predictable market environment than we’ve had in recent years. Strategic Tactical Shifts may enable MEGI to take advantage of market segments likely to outperform the general market in a less stable market environment. Time will tell if their stab at active management will outperform competitor’s passive approaches.
The Merrill Edge connection is also important. If you’re a new investor, you might want to start with a MEGI account as a basic investment foundation. But over time, you can try your hand at self-directed investing in funds and individual securities on the Merrill platform. The Merrill Edge platform make’s it easy to access active trading or the Merrill Edge Guided Investing robo-advisor, all in one place. You can have both managed investments and your own trading account.
It should also go without saying that MEGI is a natural choice for the millions of Bank of America customers. With the combination of the two, they can invest with the same corporate family they bank with.
If you’d like more information, or if you’d like to open up an account, visit the Merrill Edge Guided Investing website.
Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in New Hampshire and can be followed on Twitter at @OutOfYourRut.
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