Examining Merrill's Motives

To the critics, it isn't that simple. Although a name change does give brokers at other firms the ability to sell Merrill funds under BlackRock's name, it also affords brokers at Merrill Lynch the same luxury.

In the past, Morgan Stanley(MWD Quote) has been fined for promoting sales of its own funds by rewarding brokers with prizes when they pushed in-house funds. Morgan Stanley has said it stopped this practice, but skeptics still warn clients to ask brokers at their financial management firms about who manages a fund before buying it.

Bove is critical of this deal, and offers two explanations for Merrill Lynch's decision to surrender both majority control and management presence with the new firm. Either Merrill Lynch believes that the regulatory climate won't allow asset management businesses to grow in the future, or the company plans to leverage its large private client base to tout and sell BlackRock's fixed-income products.

The fact that Merrill Lynch retained a 49% ownership in the company makes the latter explanation more likely.

If Merrill Lynch uses the transaction to beef up sales of BlackRock's fixed-income products to those in its private client base, it "flies in the face of what regulators wanted to do."

"All of a sudden, Merrill Lynch brokers sell more BlackRock products because of Merrill's ownership. Isn't that what the regulators don't want?" said Bove.

To be sure, Merrill Lynch's private client business was just as capable of selling BlackRock's funds in the past as it is now. But analysts agree that the new relationship is an advantage for both, and can help different businesses within the private client group. One particular Merrill Lynch business, separately managed accounts, may get a boost.