No favouratism At Merrill lynch

As always happens when it comes to sales in a competitive environment, there is a danger that the end customers might buy the wrong product or one that does not fulfil their needs.

The way third-party funds have been distributed through banking networks has been often criticised for not focusing on investors’ need for finding the right investment solution but for trying to push those products that represents the highest profits for the distributor.

“Coming from an investment bank I am probably going to be accused of being a product pusher,” said Roger Portnoy, leader of the wholesale initiative at Merrill Lynch. “The thing is that whether you are an investment bank or a private bank, and however you think about providing a service, you have to fulfil your objective. Products play a role in delivering a mandate, which is wealth creation and wealth preservation.”

He admitted, however, that the profits for Merrill’s business have been predominantly generated by constructing increasing swathes of products, particularly with a structured element, which generate higher charges.

“We are getting clients who are more sophisticated to transact more business and invest in more complex solutions.”

Merrill Lynch’s private banking platform distributes 35 external products in addition to the internally managed suite. “All the products are marketed equally, with exactly the same remuneration involved,” said Mr Portnoy. “We distribute more non-Merrill products than we do Merrill products on our system. But tension is greater when your own producer performs poorly.”