Products May 14, 2014

Merrill Lynch Unveils Holistic Wellness Program

A new financial wellness program from Merrill Lynch helps clients assemble and compare competing financial concerns while also shaping an individualized, goal-oriented path towards a better retirement.
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David Tyrie, managing director and head of retirement and personal wealth solutions, introduced the new Merrill Lynch Clear financial and retirement planning framework during a networking event in New York. The framework is presented and leveraged through a unified mobile and tablet application, he explains, and brings together the seven “distinct life priorities” most commonly cited by Merrill Lynch clients, both anecdotally and across the firm’s extensive body of financial planning research.

These priorities include health, home, family, finances, giving, work and leisure, Tyrie says. The Merrill Lynch Clear program, delivered through the firm’s adviser network, offers extensive education and next-best-step client advice across these areas, Tyrie explains. But more importantly, he says, the framework is rich with interactive tools and calculators that allow clients to start thinking about the way their unique goals and aspirations across these seven areas apply to asset allocations and portfolio-building decisions.

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“After undertaking what we believe is really an unprecedented amount of research on the question of what our clients are concerned about, we’re starting to learn that really all of it can be boiled down into some form of these seven categories,” Tyrie explains. “As you know, retirement investors aren’t interested in hearing about lump sums anymore. They want to know what they will need to fund their own specific retirement, and how that might be achieved.”

Specialist advisers across Merrill Lynch’s individual wealth management and retirement plan segments are already receiving specialized training on helping clients apply the framework, Tyrie says. Taken together, the framework and accompanying adviser resources will help clients better connect daily financial matters with long-term, holistic retirement planning needs—especially when it comes to the most challenging aspects of retirement, such as when to claim Social Security or how to plan for ballooning medical expenses late in life.  

The firm hopes the framework will also lead to more personally meaningful conversations for clients, helping them better determine goals and priorities for an uncertain future.

Andy Sieg, Bank of American Merrill Lynch’s head of global wealth and retirement solutions, says the framework was originally built with Baby Boomers in mind, but it should also be helpful for younger generations of savers and investors who are unsure how to start amassing wealth effectively.

“Retirement today is a totally different experience than it was even in the recent past,” he says. “Baby Boomers are living later in life in ways no other generation ever has. This requires a bold new approach to helping people think about their lives in a comprehensive way, explore opportunities and challenges, and seek peace of mind.”

Among the framework’s new tools is a series of “discovery apps” created to help facilitate deeper conversations between clients and advisers. The first apps in the expanding discovery series focus on the exploration of the seven life priorities, along with matters relating to Social Security, health care, lifetime income needs and investment personality. Clients can input their personal information on all these subjects directly into the application to generate dynamic feedback utilizing illustrations, educational resources and interactive exercises.

Through Merrill Lynch Clear, clients also gain the support of the firm’s in-house retirement, wealth, trust and insurance specialists. More information is available through the Merrill Lynch website, at www.ml.com/retire.

The Markets May 14, 2014

Expense Ratios for Equity Mutual Funds Lower

Investors paid lower average expense ratios for equity mutual funds in 2013, says a report from the Investment Company Institute (ICI).
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“Trends in the Expenses and Fees of Mutual Funds, 2013” examines fund expense ratios or a fund’s total annual expenses expressed as a percentage of its net assets. The report shows expense ratios of hybrid funds, bond funds, and target-date funds were largely unchanged in 2013, after declining significantly in the prior several years.

In 2013, the average expense ratio investors paid for equity funds saw a decrease of 74 basis points (0.74%), representing a drop of three basis points from 2012, according to the report. The average expense ratio of bond funds remained unchanged at 61 basis points, consistent with a small percentage decrease in the total assets of bond funds last year. The average expense ratio of hybrid funds rose by one basis point in 2013, to 80 basis points.

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“Appreciably lower expense ratios paid by investors for equity mutual funds in 2013 reflect the strongly competitive nature of the fund industry, as well as gains in equity fund assets which, through economies of scale, helped lower fund expense ratios,” says Sean Collins, ICI’s senior director of Industry and Financial Analysis, based in Washington, D.C. “This report also shows that the average expenses of both actively managed funds and index equity funds have been trending downward for more than a decade.”

The report also shows assets in equity funds increased from $5.94 trillion in 2012 to $7.76 trillion in 2013, reflecting both net cash inflows from investors and strong stock market performance. The decrease in expenses paid for equity funds in 2013 marked the fourth straight year of decreases, after an increase of four basis points in 2009 in the wake of the financial crisis.

This pattern is not unexpected, given the decline in the stock market during the financial crisis and the stock market’s subsequent recovery, say the report’s authors. They note that fund expense ratios often vary inversely with fund assets because of economies of scale.

During the last decade, the report notes, the average expense ratio of actively managed equity funds has decreased 19 basis points, while that of equity index funds has decreased 13 basis points. In addition, the average expense ratio of bond funds has decreased 19% and that of hybrid funds has decreased 11% during same time frame.

When it comes to money market funds, the average investor paid an expense ratio of 17 basis points in 2013, one basis point less than in 2012. The report says the expense ratios of money market funds have decreased sharply for several years as the majority of funds waived fees to ensure investors’ net returns remained positive in the continuing low interest rate environment.

Among funds-of-funds, the average expense ratio incurred by investors was 80 basis points in 2013, three basis points less than in 2012. The total expense ratio of funds-of-funds includes the expenses that a fund pays directly out of its assets, as well as the expense ratios of the underlying funds in which it invests. The report notes that since 2005, the average expense ratio for investing in funds of funds has decreased 21 basis points.

For target-date mutual funds, which are often structured as funds-of-funds, investors paid an average expense ratio of 58 basis points in 2013, which is unchanged from 2012. During the past five years, the average expense ratio of target-date funds has decreased 13%.

For the report, ICI evaluated fee trends using asset-weighted averages to summarize the expenses that shareholders actually pay through mutual funds. To compute the average, ICI weights each fund’s expense ratio by that fund’s end-of-year assets. The report is here.

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