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Trouble getting a margin account with Merrill Lynch


FCharlie
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I have been rejected by Merrill Lynch after attempting to change my cash brokerage account to a margin account. They won't tell me specifically why, but they hinted that one time it was because I checked a box for "seldom" regarding my trading activity. Then, I resubmitted a new one with "active" and they rejected it again, saying they were skeptical of my net worth. I followed up by explaining the sources of my net worth, to which they replied that I would qualify. Then the next day, they call and say I was rejected again and they won't tell me why.

 

Has anyone had difficulty obtaining a margin account with Merrill Lynch? I'm not even attempting to trade on margin, I simply want to take a margin loan out to buy real estate, which they said I was free to do.

 

I haven't ever heard of anyone rejecting margin loans. After all, they are secured by the securities in the account. What gives?

 

 

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Make everything look like you're experienced to the max. Seldom, active, aggressive, etc. Then when it asks what your goals are choose all the boxes: income, growth, speculation, etc. Make sure you choose that you have experience with futures and all other securities they ask you about.

 

They once questioned my net worth too (rightfully so). I just told them I had an inheritance.

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I've been using ML for the past year. One, everyone's recommendation to appear aggressive is right. The evaluation is a black box and ultimately, you're responsible for any trading.. if you're on too much margin, they will sell your positions to cover... But, two, ML/MLEdge's processes are draconian and CS are really difficult to work with. The bureaucracy will kill you. I've run into them 3 times.. and it's always painful. If you're lucky, you'll find someone willing to help and invest time with you. Otherwise, you'll get the run around.

 

I got the Platinum Rewards tier and they're not really helpful for their preferred clients. For TDAmeritrade APEX, they get a special number and they work with you... With ML, I've realized they could care less. Try moving to another brokerage.

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I've been using ML for the past year. One, everyone's recommendation to appear aggressive is right. The evaluation is a black box and ultimately, you're responsible for any trading.. if you're on too much margin, they will sell your positions to cover... But, two, ML/MLEdge's processes are draconian and CS are really difficult to work with. The bureaucracy will kill you. I've run into them 3 times.. and it's always painful. If you're lucky, you'll find someone willing to help and invest time with you. Otherwise, you'll get the run around.

 

I got the Platinum Rewards tier and they're not really helpful for their preferred clients. For TDAmeritrade APEX, they get a special number and they work with you... With ML, I've realized they could care less. Try moving to another brokerage.

 

So if I resubmit the application, appearing as aggressive as possible, wouldn't they notice that I just applied and wasn't aggressive on the prior applications?

 

I hate to switch brokers, Merrill Lynch gives you free trades once you have $50,000 in your accounts, Plus they give you a 50% bonus on your credit card cash rewards. It's so lucrative to be there, I'd hate to leave over this.

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With the below margin rates which are incredibly uncompetitive relative to interactive brokers and others, there is no way that it is cheaper to have a margin account at ML, unless you aren't borrowing on margin. If you aren't borrowing on margin, then why have a margin account?

 

I guess one scenario is where you want to be short uncovered options or spreads (this would require a margin account but not borrow cash at the margin rates), but still I can't imagine the Thundering Herd ever being cheaper or better than Interactive Brokers or fidelity.

 

Re the credit card,  just get a city double cash card and get 2% on everything for no annual fee (or if you go to Fido, they have a 2% Amex). Are you getting more cash back than 2% with the bonus?

 

Also, ML's execution was terrible when I had them. I fill orders at Fido and IB that I just don't think would happen at Merrill Edge, but if you deal in only liquid stocks that probably doesn't matter.

 

The ML Base Lending Rate (BLR) is 5.250%. Margin interest rates range from 4.500% - 8.625%.

Loan amountMargin rateEffective rate

$10,000,000+Base -0.7504.500

$5,000,000 - $9,999,999Base -0.500        4.750

$1,000,000 - $4,999,999Base                    5.250

$500,000 - $999,999Base +0.625              5.875

$100,000 - $499,999Base +0.875              6.125

$25,000 - $99,999Base +2.250                7.500

Less than $25,000Base +3.375                8.625

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I got the Platinum Rewards tier and they're not really helpful for their preferred clients. For TDAmeritrade APEX, they get a special number and they work with you... With ML, I've realized they could care less. Try moving to another brokerage.

 

They do have a separate number for preferred clients as opposed to the automated crap you have to deal with using the regular number. It's called the Premium Services line: 866-204-0150. I've noticed that they're generally more willing to help than the other number.

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I got the Platinum Rewards tier and they're not really helpful for their preferred clients. For TDAmeritrade APEX, they get a special number and they work with you... With ML, I've realized they could care less. Try moving to another brokerage.

 

They do have a separate number for preferred clients as opposed to the automated crap you have to deal with using the regular number. It's called the Premium Services line: 866-204-0150. I've noticed that they're generally more willing to help than the other number.

 

I'm a preferred client as well and it has been great. All my interactions have been smooth and helpful.

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With MLEdge, I found it hard to find anyone taking ownership and "working the system"/advocating for me. These were my experiences:

 

1) Lost cost basis from Ameritrade to MLEdge - I did an account transfer from Ameritrade to MLEdge and the  equities came over fine, but they lost my cost basis for my options. My first call was to see if the options cost basis for options came later. The easy answer (yet wrong) was yes. "Give it 2-3 more weeks". Three weeks later, I called them. They said it was an Ameritrade issue. I called Ameritrade and they took ownership and finally got the truth that a) the cost basis was sent all at the same time as the equities and  b) they can only send it once... MLEdge would just have to reprocess to original file. Called MLEdge and said the cost basis was comprehensive and they said their system couldn't run it again. So, essentially, MLEdge never processed the initial file correctly. I cannot believe others didn't fall into this same situation. So, I had to maintain my own cost basis for options -- but, seriously, I've transferred before and Scottrade, Ameritrade, etc. have never had these problems. Trading 101.

 

2) Magic number for number of puts (even with plenty of selling power) -  When there is a market sell off, I like to sell puts on value stocks. So, BAC under TBV is a trade I would like to do.  At Ameritrade/Scotttrade, they check the short position relative to your total account value. So, you don't over leverage. At MLEdge, they put a magic number of 100 contracts per account. For lower priced stocks (BAC), they have lower priced options and thus, more contracts to get same exposure... whereas something like AMZN (which I would not sell puts on) would have high priced options and generally more volitile. So, as expected a 100 contracts on BAC is a lot different than 100 contracts of AMZN (okay, you need to factor in duration and strike price, etc... but you get my point). The margin power needed is different, but if your account can handle it. I found multiple reps that understood the concept, but couldn't change the bureaucracy or the wizard behind the curtain. Even to this day, I have a 100 contract limit and it wouldn't make a difference if I had a 5 million dollar account or 50k account. It's 100 contracts.

 

3) Crappy executions - Although, I get 100 free equity trades and $2.95 on options... I realized I do not get good executions on options. I have trades clear on Ameritrade and Scottrade at lower prices than ones I put in MLEdge at the same time. You might get free equity trades, but their revenue is built into the bid/ask prices. It's an old trick, but it's there... so, if it's low volume stocks like FRBC or AIQ, you might not get executions or they'll force you to trade in increments of 5 cents or something stupid that Interactive Brokers or Ameritrade would not do...  Somehow they get their money.  it adds up. Bad trade prices and executions are going to kill you more than "free" commissions.

 

4) IRS Cost basis fiasco - my latest and probably the last straw is they have a "specify the lots" feature on trades. So, you can do LIFO or FIFO. For BAC, I started as LIFO from my prior broker. So, I need to for IRS keep it LIFO. Good news, you can specify the lot. So, I did that for my trade, but they have a system limitation where you can only specify 5 lots (MAGIC number again)... and all others are default to FIFO... when you want to get out of the position, you don't want to break down your trade in multiples of 5 because that's a limitation of their system. Why not 6 or 10 or 20? So, for large lot sells or if you average in (30 share here or 50 shares there to use the "free trades"... ) you'll get screwed if you sell outside of 5 specific lots. Because the IRS will wonder why you use both LIFO and FIFO.  Whatever the case, you'll be realizing too much profit in some cases and it's reported to the IRS.  Tried to explain it via email/phone. One rep said he worked something like this 3 weeks ago for a client.. and he will try to help me. 4-5 other reps says... I'm screwed - cannot fight the system. I should have specified it beforehand. I told them I couldn't with the magic number.

 

So, all in all, it's just drama. I'm not trying to over-leverage, but I want a system that keeps track of my taxes correctly, gives me good pricing (free trades, but the commission is now built into the crappy prices), and responsive customer services when there is an issue.

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