Is Merrill Edge a Scam?
Merrill Edge is the online discount brokerage company owned by Merrill Lynch, which is owned by global financial giant Bank of America (BofA). It was launched in
2010 after Merrill Lynch became a subsidiary of BofA. Merrill Edge emphasizes their integration with BofA as a convenience advantage since they can seamlessly
integrate banking and investing activities to provide one-stop financial service to customers.
However, during the financial crisis that precipitated the so-called "Great Recession," Merrill Lynch got into serious financial trouble due to its activities in
the Collateralized Debt Obligation (CDO) market since the early 2000s. When this asset category imploded after the housing bubble popped in 2007, Merrill Lynch
posted billions of dollars in losses from these investments. They were sued for fraud and other financial violations by several entities and teetered on the edge
of bankruptcy as the Federal government tried to decide how to handle the financial crisis.
Ultimately, Merrill Lynch was purchased by BofA for a steep discount to its value only a few years earlier. Merrill Edge was a direct result of BofA's purchase of
Merrill Lynch, so investors should keep that in mind going forward in the event of another crisis in the financial markets. Although Merrill Lynch has a long
reputation as a broker, Merrill Edge is still a young company and has not yet developed a long-term track record or reputation.
Is Merrill Edge a Safe and Legitimate Firm?
There's no such thing as 100% safety in any business, especially businesses in the financial sector. Some sort of risk is always present, and even some of the oldest
and largest companies in the world can experience difficulties and even go bankrupt. The fact that Merrill Edge has won numerous awards for features and services
from diverse sources like Barron's, J.D. Power, and Kiplinger's indicates the company is doing something right to satisfy its customers. This, in turn, means
Merrill Edge is not likely to lose many customers in the foreseeable future, which minimizes its risk of bankruptcy.
Through its parent Merrill Lynch, Merrill Edge is a member of the Financial Industry Regulatory Authority (FINRA), an organization dedicated to investor protection
and market integrity. According to FINRA's website, the agency is "an independent, not-for-profit organization authorized by Congress to protect America's investors
by making sure the securities industry operates fairly and honestly." This means member firms such as Merrill Edge (through its parent Merrill Lynch) are
willing to submit to the scrutiny of their operations, comply with FINRA's rules, and promote market transparency and investor education. In this respect, Merrill
Edge is as safe and as legitimate as any other discount brokerage in the country
Merrill Edge Complaints, BBB Rating
Merrill Edge's standing with the Better Business Bureau (BBB) is unclear since only two individual business locations were listed, and no complaints have been
filed against those two listed branches in the past three years. However, Merrill Edge's parent company, Bank of America, is an accredited member of BBB.
BofA has an A+ rating. In the past three years, 6,377 customer complaints have been closed. Here's a breakdown:
Advertising/Sales Issues - 461
Billing/Collection Issues - 1,834
Delivery Issues - 70
Problems with Product/Service - 3,969
Guarantee/Warranty issues - 38
Other - 5
According to the BBB, Bank of America has received 47 reviews. The majority are negative, which lowers BofA's overall rating to 3.78 stars out of five stars based
on reviews combined with the BBB rating of A+.
A check of Merrill Lynch branches listed with the BBB showed minimal activity with regard to customer complaints, and none of the branches that were checked listed
significant statistics.
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Merrill Edge Pros and Cons
Is Merrill Edge SIPC Insured and FINRA Regulated?
As a registered broker-dealer, Merrill Edge is a member of the Securities Investor Protection Corporation (SIPC). Bank of America is a member of the Federal
Deposit Insurance Corporation (FDIC). SIPC and FDIC both guarantee accounts up to certain thresholds in the event of failure of a member company. However, investment principal is never guaranteed, so investors in securities such as stocks, mutual funds, ETFs, or options are not protected against loss of principal, only the value of those securities at the time of bankruptcy. SIPC limits are $500,000 per account, of which $250,000 of cash is protected. FDIC limits on bank deposits are $250,000 per account.
Conclusion
Merrill Edge appears to be a safe, legitimate online broker that is not a scam. However, its association with Merrill Lynch and their troubles during the Great
Recession should alert potential customers to the fact that not even the financial giants are immune to serious financial problems and perhaps it is worth to consider
safest brokerage firms that have never been in position to take a bailout.
Merrill Edge Account Review
Read detailed Merrill Edge Investing Review »
Updated on 1/12/2017.
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