What the Bank of America shakeup means for you

Larry and Sandy Reed of Oak Park, Illinois, say they aren't going anywhere with their investments because the connection they have with the firm - and their adviser - is deep.

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"We've worked with Merrill Lynch since 1981 because my uncle worked there at that time, and my grandfather had given us stock through Merrill Lynch for our wedding," Sandy Reed says. While she initially came to Merrill because of family ties, she takes comfort these days in Warren Buffett's decision to invest $5 billion in Bank of America last month.

The Reeds find other Bank of America headlines troubling, including those involving controversial mortgage practices at Countrywide Financial, which the bank purchased in 2008.

Existing clients should ponder whether Bank of America's financial woes will put too much pressure on the company to change its bottom line - meaning that Merrill's advisers may have a new agenda, such as pushing products that generate the most profits for the bank.

"Is the adviser doing what's best for me, or is the adviser doing what's best for the company?" says Jack Waymire, founder of Paladin Registry, an information services provider that rates financial advisers. "I would view Merrill Lynch more as a distribution system to sell products; in this environment, Bank of America just tells Merrill Lynch to sell its products."

That may not pose problems on its own. But Waymire, author of "Who's Watching Your Money?", believes Merrill Lynch and other big Wall Street firms now put their profits way ahead of investor gains.

"If you've got these household names handling your money, you may feel relatively safe," he says. "Merrill has all these resources, and they're using sales skills to convince you they're experts. The advisers are not even managing the money half the time. It's a big, big mess and it's not going to be cleaned up anytime soon."

The bank disagrees. "These comments are woefully dated and do not reflect the reality of how our financial advisers serve their clients," says Bank of America spokeswoman Morris. Nine out of 10 clients would recommend a Merrill adviser to their family and friends, she notes. "The average length of our relationship with clients is 13 years, and our client attrition rates are in the low single digits," adds Morris. "Our training program for advisers is the longest and most rigorous in the industry."

Moreover, Merrill Lynch "is hiring in a big way," says David A. Geracioti, editor in chief of Registered Rep magazine and RegisteredRep.com. This has generally meant forcing out financial advisers who produce less than $400,000 per year -prompting some defections of long-time Merrill advisers to the likes of HighTower, a Chicago-based aggregator of financial adviser firms.

For customers sticking with Merrill, such as the Reeds, there is good news: "Client assets have held up pretty well, all things considered," Geracioti says. "The only way Bank of America would spin out its best-performing unit is if it had to 'burn the furniture' to raise capital. In fact, Merrill Lynch is the crown jewel of Bank of America, one of the bright spots in an otherwise troubled company."