Download Today at Merrill Lynch, I began by reorganizing some old client files

Megan Smoot
5/12/17
Dr. Graham
Internship: Merrill Lynch
As an upperclassman enrolled in UNCW’s Cameron School of Business, I
will be graduating in May of 2004 with a degree in Finance. I was afforded the
opportunity to pursue academic credit through an internship with a local business
that concerns itself with my studies. This internship is offered to any business
school senior that meets certain university standards. At Merrill Lynch, an
international brokerage firm, I was presented with the chance to earn academic
credit while gaining invaluable private sector experience. I worked directly with
Jennifer Santinello, one of the Financial Advisors. Jennifer has been at Merrill
Lynch for two years, so while she has an established clientele she is still in the
beginning aspects of her career. Completing the academic requirements for my
internship, this report summarizes my activities with Jennifer and serves as
evidence of the work completed there.
In the following pages, I outline the academic framework of my
undergraduate degree, introduce my selection of a business major (and my later
attraction to the study of finance), summarize the tenets of my financial studies,
and provide a sample of the actual duties performed at the Merrill Lynch office.
This report ends with some concluding remarks, encouragements for students
following me with other internships, and ideas I developed about finance and the
financial planning industry during the semester.
Besides core work in the Cameron School in management, marketing,
business law, operations management, accounting, economics, and information
systems, I have been focusing my studies on finance. These courses include
Introduction to Corporate Finance, Intermediate Corporate Finance, Advanced
Corporate Finance, which all deal with the theory and practice of corporate
finance. Real Estate Investing discusses the principles of property management
and practices involved with real property. Risk Management introduces the risk
management function and the basic methods used to handle risks. Principles of
Investing and Investment Management deal with alternative investments, with an
emphasis on financial instruments.
I choose Finance as my major because I enjoy the idea of helping someone,
be it a person or a corporation, organize their finances in such a way that they can
see their goals realized. I especially like the idea of helping individual people
accomplish their objective, which is why I choose an internship at Merrill Lynch,
a major financial planning firm. Financial advisors have clients come to them
knowing only that they want to retire in twenty years, but do not know how they
are going to be able to. Their advisor can show them how they can reach their
goals. Providing people with this invaluable service is something that has always
appealed to me, and I was eager to learn more about it.
This internship ties directly into my finance major in numerous ways. The
most significant way was the opportunity I had to take the information presented
to me in class and witness it applied in a real business situation. By attending
class, reading the texts, and studying my notes, I learn the basics of finance. By
actually applying the information to real life situations and people, the information
is reinforced yet again. I am able to relate it in a way I never would have
understood had I not been given this opportunity. It was interesting to see how
directly related my class work was to my work at Merrill Lynch. Risk versus
return, beta, and diversification are all terms I have learned in my classes; I was
amazed to learn these are the same terms used by financial advisors.
Beginning in January of 2003 and continuing for the balance of the term, I
spent much of my time outside of class at Merrill Lynch. Each day was different
then the last, yet I increasingly felt more and more comfortable and confident in
my knowledge and ability. Each day when I arrived Jennifer and I would sit down
and go over the work she had for me. First, she would give me some background
information on whatever it was we were doing, be it a client, a tax law, or a new
project. After that she would explain what she wanted accomplished, and we
would talk about how I could achieve that. I would then take my work into an
unused office and being working. Jennifer was always close by in case I had a
question, but it was nice to be able to work independently. I learned to make
decisions on my own and use my judgment to do the best work I could.
It is important to clearly understand the different types of stocks that are
available to clients. Income stocks are ones that pay dividends. These are most
appealing to investors looking for a regular source of income. They are relatively
safe and can provide a substantial amount of income; however, because they are
paying out a large portion of their earnings, their growth potential may be low.
Stocks that do not pay out such high dividends can be classified as growth stocks.
These companies have had steady increases in earnings over the years and provide
a high return on equity. Lastly, value stocks are a popular choice in today’s
economy, as they are ones that are “out of favor” with the market. These stocks
have low prices compared to their fundamentals, and usually do well when the
economy is recovering.
An important part of a financial advisor’s job is not only to create a
successful portfolio for a client but also to maintain it. Depending on the client’s
needs and the size of their investments, this can be done in many ways. When
creating and maintaining a portfolio there are some key points to consider. First is
the client’s level of risk. Depending of age, financial goals, and personal
preference, the financial advisor must assess at what level the client is. They can
be classified as aggressive, moderate, or conservative. Then it must be determined
what type of investments the clients is looking for, be it income, growth, or value.
This will vary depending of the client’s goals and reasons for investing. Each
portfolio must then be properly diversified across stocks, bonds, mutual funds, real
estate, international, etc., depending on their determined risk and goals. During
my time at Merrill Lynch I learned much about this.
One client at Merrill Lynch was interested in knowing how her two mutual
funds were doing. While we at Merrill Lynch could have simply looked at the
figures and easily seen this, a client that does not have the financial knowledge
and background needs the information to be presented to them in a clear,
organized way. I did this by creating a simple spreadsheet showing the original
amount of the funds, their growth over the last three quarters, and their ending
amounts. Then I also put this information into a graph, showing each funds
progress compared to the other. By doing this, the client can see exactly what is
going on, and can better understand their current financial situation.
Not all clients’ needs are so easy. Clients at Merrill Lynch receive a yearly
review of their portfolio. With larger clients, this can be quite a task. To help
Jennifer with one such client’s, I was asked to fill out his Net Worth form, as to
estimate his overall value. To do this, I needed to look at many things. One was
his original evaluation, which contained his income, real estate value, personal
property, etc. Next I need to find out the value of his stocks. This information
could be found from his account, which is all accessible via various programs on
the Merrill Lynch computer database. I also needed to find any other capital he
had, such as a checking account, mutual fund, or IRA. This was all located on
various documents throughout his file. It was interesting to read through them all
and have to figure out not only what it all meant, but also what asset it was
classified as. Other documents I needed to analyze were his life insurance forms.
He had six different life insurance polices, and I need to find out the death benefit
each one offered in order to determine their combined worth. Once I had
compiled all this information, I put it into the Net Worth form, which was divided
into categories such as Assets, Liabilities, Cash, Insurance, and Retirement. Once
this was done, it was entered into a spreadsheet and his total Net Worth could be
evaluated. Now Jennifer could advise him on how well he was reaching his goals,
and what changes needed to be made.
Some client’s investments consist primarily of stocks and mutual funds. To
properly advise them on a position can be difficult. First, their current stocks and
mutual funds must be organized by industry to ensure that their portfolio is
properly diversified, as to reduce risk. One specific client I was working with had
invested heavily in telecom and technology, so we kept only the top performers
and advised him to sell the rest. Then a spreadsheet is made, which includes a
real-time quote of the stocks current price and yield, along with how much it has
risen or fallen since the client purchased it. This information is then assessed to
determine the position the client should take with each stock. The client may be
advised to hold, buy more, or sell that stock. Once these decisions have been
made, Jennifer and I looked at what was left in the client’s portfolio and then
advised them once again, this time on what new stocks to acquire in order to
replace the changes made previously. For this client we looked for stocks that
were going to bring the client income, were fairly low risk (as was the client), and
would serve to further diversify their portfolio. The information is then put into a
pie chart, showing the current portfolio and the one we were recommending.
In today’s economy, low interest rates make refinancing one’s mortgage as
attractive option. At Merrill Lynch they offer several competitive packages. I
learned the various types of mortgages and the differences between them. For a
mortgage balance of less then $322,000, one can get a conforming loan; for over
that amount, it would be classified as non-conforming. Clients can also choose to
pay a 1% premium at the beginning of their loan in exchange for a reduced rate.
Also, clients can choose between either an ARM loan, which guarantees the client
a fixed rate for 10 years, or an interest only loan, in which the client’s first years of
payments go toward their interest only, not the principal. Jennifer and I went
through the list of her clients and searched for one’s in which refinancing would
be of benefit. We then calculated the rates and payments they would have on a
new loan, and compared them to their current one. Jennifer will then contact those
client’s who would most benefit, and discuss the option with them.
When a new client comes to Merrill Lynch, they are assigned a client
account number and are entered into the Merrill Lynch comprehensive computer
database. Once their information has been entered, the advisor can use that to
track all future contact they have with the client, as well as record all investment
transactions. The client’s assets can be viewed at anytime, as well as their losses
and gains and the net worth of their current investments. This is helpful for many
reasons. It in important for the advisor to be able to quickly access a client’s
information at any given time, should they have any sudden questions or concerns.
Also, when it comes time to review the client’s account and make
recommendations, it is very easy for the advisor to do this by simply pulling up
their account. With all their information in one place, the advisor can see their
client’s current position.
Through my internship at Merrill Lynch, I have been able to form a fairly
specific and accurate picture of what the financial planning industry is like. Some
advantages of this job are the ability to work independently and without any direct
supervision, the unlimited potential income, and the personal contact with clients.
Some disadvantages are the difficultly to obtain clients in a lagging economy, the
lack of direction and guidance offered to new advisors, and the negative
connotation some people carry about financial planners. Overall, I learned that to
be a financial planner you need to be able to work on your own, be very outgoing
and people oriented, and have a strong sense of the market and the financial
industry.
By supplementing my academic learning with this internship, I feel I have
obtained an advantage over my peers who simply learned the “text book” version.
I benefited by gaining confidence in the decision to be a finance major, and in my
ability to apply my learning to my career. For any student considering an
internship, I would highly recommend it. Through the classes offered in the
Cameron School of Business, students are exposed to many areas of business. For
most students, one area in particular will catch their attention. By taking an
internship in this area, one is able to see how classroom information is used in the
business world, which can help in their future decision of a career path. The time
spent with local firms – including many participants in the financial services sector
– is invaluable. Whereas much that is accomplished in the classroom speaks
directly to ongoing concerns of businesses in the “real world,” actually spending
time “in the trenches” cannot be replicated within the confines of the campus.
After completing this internship, I take away with me an irreplaceable experience
that will take me far in my life, both personally and professionally.