The Demise of the Financial Supermarket

With Merrill Lynch's decision to sell its $539 billion mutual fund family to BlackRock, the flaws in the "one-stop shopping" premise (with regard to financial services) seem apparent.

Good article in the Wharton newsletter that discusses the Merrill Lynch-BlackRock deal.

The underlying driver of the creation of the financial supermarket was the desire to even out the cyclicality of : investment banking, trading, and commissions. Asset management seemed to be a perfect solution for the urge to smooth revenue streams.

The flaw in this strategy was that the large brokerage firms were not able to compete with the free-standing mutual fund specialists, e.g. American Funds, Fidelity, and Vanguard. In the eyes of Wharton finance professor, Jeremy Siegel, "Anyone who objectively looks at them sees that very few have done well. The fees are high and the performance is extremely mediocre." He's referring to the fact that Merrill's funds underperformed those of mutual fund specialists...and had higher annual expenses.

The other chink in the one-stop shopping premise is linked to the fact that many investors like to spread their money around a bit. The conflict-of-interest issue, when an advisor touts their firm's proprietary mutual funds, has becoming increasingly noticeable to investors...and to the advisors as well. With the Internet, it has become easy for investors to shop around anyway. Moreover, the argument of having all of one's financial information on one statement is eroded as certain financial software programs can now do that automatically by assembling information online.

In the battle between the Generalist and the Specialist, the Specialist wins again.

Comments

[Swimwear Bikinis]

Two of a trade can never than one.
b

[Air Max]

We all make mistakes.
3

[Nike Air Max]

This is so great that I had to comment. I am usually just a lurker, taking in knowledge and nodding my head in quiet approval at the good stuff.