Merrill Lynch Brokers Rave About New Deposit Account
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Merrill Lynch brokers are buzzing about the firm's expansion into banking, most notably Merrill's sweep of cash into an FDIC-insured deposit account instead of a money market.
"This is huge," says one Merrill producer on the East Coast. "All the people who have been going to banks can come here and get that same insurance."
Instead of earning 2 percent interest at a bank, clients can now earn 5.4 percent interest through Merrill's FDIC-insured money market deposit accounts.
In March, Merrill began sweeping moneys from client retirement accounts and Merrill Lynch Direct discount brokerage accounts into the new money market deposit accounts, according to a Merrill spokesperson. Moneys from other types of accounts will be moved later this year. Eventually, standard money markets will be phased out.
"This is going to be an awesome asset-gathering tool for us," the broker says. "If you can get more on your deposits at Merrill, why would you keep it in the bank?"
Money market deposit accounts are held by Merrill Lynch Bank & Trust and Merrill Lynch Bank USA, two institutions that should see assets skyrocket as a result, according to brokers. Each client household will be allowed to have two money market deposit accounts (each insured up to 100,000 dollars) along with two subaccounts insured up to 100,000 dollars each--or 400,000 dollars per household. Merrill will implement a tiered system of interest on those money market deposit accounts later this year or early 2001. Higher balances will earn better rates.
Other wirehouses also offer FDIC-insured money market accounts. Lyndon Keyes, director of Salomon Smith Barney's financial management accounts, tells RR that his firm has offered an insured deposit account since the end of 1997, but offers clients the choice of sticking with a money market fund. "Most of our clients ... find money market mutual funds a comfortable, safe investment," Keyes says.
For clients who prefer FDIC protection, SSB sweeps cash into a deposit account at one of 13 banks, Keyes says. At press time, those accounts were paying 5.4 percent, the same as Merrill.
