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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED
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To: Voltaire who wrote (3330)9/23/2000 11:21:37 PM
From: adairm  Read Replies (1) of 65232
 
Voltaire: Yep, it does. Also, consider this... Merrill Lynch has been pushing the "Managed Accounts" program on their clients. My parents are typical clients. They set up "Wrap" accounts with a "Independant Money Manager" who actually decides on what the account is investing in, when to trade, and so forth. M-L is the record keeper. The trades are "free", but the fee is 2% of the balance of the account per year (billed quarterly). M-L and the money manager split that up between themselves.

Now this is both good and bad.

The good: The only way M-L and the Money Manager make MORE money is to grow the account. So, it puts them on the investor's side.

The bad: they get paid their fee regardless of whether they grow the account or not. Whether they trade or not. The client is not in control of his own money, and the money manager may make trades that create a tax burden on the client. (However, the client can have some control over the Money Manager, if desired.)

Given all this, M-L has moved a great deal of their clients moeny into these accounts. They don't want to look bad and lose so much moeny that their clients close the accounts and invest it in T-Bills! So, they want to continue to provide a reasonable return to keep the clients happy.

Especially at quarter end! (When they determine market value for billing purposes!)

Adairm
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