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Fishing for Assets

By Larry Barrett  |  Posted 2003-08-01 Print this article Print

Merrill Lynch is investing up to $1 billion so it can reel in wealthier investors. Has it gone overboard?

Financial advisers at the Merrill Lynch office in San Jose, Calif., cringe just before 1 p.m. local time, and it has nothing to do with trying to snag profits before the stock market closes.

At 1 p.m., Merrill Lynch's daily video feed starts. And brokers know there's a good chance the network they rely on for their livelihoods may crash. The brokers' outdated computers strain to handle a vast amount of data fed through the network to their individual workstations.

If there's a crash, not only will Merrill's financial advisers miss out on whatever stock or mutual fund idea is discussed during the feed—they will be crippled if a client calls. A crash will prevent them from accessing client accounts until the information technology department reboots the system.

"It got so bad that they were sending out e-mails telling us what we should avoid having open at one time so that we didn't crash the system," says a Merrill Lynch adviser in San Jose.

Enter Byron Vielehr, chief technology officer for Merrill Lynch's private client group, which the firm established last year. He is gambling on a massive project—estimated to cost up to $1 billion over five years—to hand off to Thomson Financial the creation and maintenance of applications used by 14,000 Merrill advisers to interact with their big-dollar clients—those with assets of more than $1 million.

What makes this project unique? For starters, Merrill Lynch wants its financial advisers to more easily collect and share data on these key clients. The system, which uses customer-relationship management software from Siebel Systems, is designed, for example, to send an alert to a financial adviser when a client's bond matures or if the percentage of equity investment in an account exceeds a certain level.

Eventually, Merrill Lynch hopes to add more personal information, such as when a client expects a child or grandchild, or is closing in on retirement. The goal then would be to enable advisers to promote targeted products and services to each client.

Merrill Lynch "wants to have the tools to effectively target these clients and have a database of personal information that will help increase their total assets under management," says Rakesh Shetty, director of Siebel Finance. "They need to be able to make a certain number of calls to clients each year. They also want to be able to do a certain number of portfolio reviews every quarter and, most important, set up a number of in-person meetings with these clients every year."

Another plus: End (hopefully) the system meltdowns.

The new Wealth Management Technology Platform will replace the $1.5 billion, seven-year-old Trusted Global Advisor (TGA) system, which uses real-time market data from Thomson Financial and applications developed in-house.

Merrill Lynch executives say the new system, which some company insiders are calling "NextGen," began testing this month at several locations and should be completely installed and live in the U.S. by next summer. An international rollout is planned for late 2004.

Selena Morris, vice president of media relations at Merrill Lynch, says the TGA system is "starting to show its age because it's all proprietary and slower than we'd like it to be." Industry analysts say Merrill expects to save about $70 million a year on maintenance of the antiquated system, an expense that represented about 7% of its private client group technology budget in 2002.

Creating and integrating applications and information delivery systems used by financial advisers to manage customer accounts has long been considered something best managed by in-house information systems staff. These systems allow advisers to create accounts, place stock orders and build investment portfolios for its clients, especially the wealthy ones.

So Merrill Lynch's commitment to an outsourcing project of this size marks a dramatic about-face, says Susan Cournoyer, a Gartner Inc. analyst.

Senior Writer
Larry, of San Carlos, Calif., was a senior writer and editor at CNet, writing analysis, breaking news and opinion stories. He was technology reporter at the San Jose Business Journal from 1996-1997. He graduated with a B.A. from San Jose State University where he was also executive editor of the daily student newspaper.
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