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Fiduciary ready: Edward Jones unveils compliance plans

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As industry executives strategize on how to best meet the requirements of the fiduciary rule, Edward Jones jumped out of the gate first, unveiling details on how its 14,000 advisers will comply with the new regulation.

Among other changes, the St. Louis-based brokerage firm will create a transaction-based IRA using the rule's best interest contract exemption. The IRA will exclude ETFs, UITs and mutual funds, according to a company spokesman.

The firm is eschewing those funds because the price variability within and between mutual funds is at odds with the requirements of the contract exemption, according to Edward Jones. Clients using the new IRA will have access to stocks, bonds, CDs and variable annuities.

The Department of Labor's controversial rule, set to be implemented in stages starting in April 2017, is currently facing legal challenges in federal court. Those lawsuits are pending, but Edward Jones and other wealth management leaders are not holding their breath.

A rundown of the big numbers to watch surrounding the Department of Labor's newly announced fiduciary rule.
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Last month, Stifel sold the independent broker-dealer business it had picked up as part of its acquisition of Sterne Agee last year. The IBD had 540 advisers and $11 billion in assets.

"I think the DoL rule has a disproportionate impact on the independent business, and that affected our decision-making," Stifel CEO Ron Kruszewski said during a conference call with analysts in August.

On Friday, Securities America said it would acquire assets from Foothill Securities, an independent broker-dealer with 210 advisers and more than $5 billion in client assets.

Foothill CEO Steve Chipman said in a statement that rising compliance costs — which will rise further with the fiduciary rule's implementation — propelled him to find a buyer for some of his firm's assets.

"I think the DoL rule has a disproportionate impact on the independent business, and that affected our decision-making," Ron Kruszewski


In Edward Jones' new transactional IRA, individual clients will need a minimum of $100,000 in qualified assets and a minimum of $10,000 for variable annuities. The firm says the $100,000 minimum is necessary to meet the fiduciary rule's requirements of diversification.

Edward Jones says it will take advantage of the rule's grandfathering clause for IRA accounts with investments acquired before April 2017. New investments in these accounts will not generally be permitted.

The firm is also making changes to its fee-based choices, affecting client accounts that are investing in traditional and Roth IRAs as well as non-qualified accounts. The minimum for Edward Jones' Guided Solutions Flex account will be reduced on Aug. 20 from $100,000 to $25,000 for clients who want to purchase stocks and to $50,000 for clients who want to individual bonds.

The firm's Advisory Solutions account, which allows investments in mutual funds and ETFs, will be reduced from $50,000 to $25,000. Edward Jones is not changing the minimum investment of $5,000 for its Guided Solutions Fund account.

A spokesman for the brokerage firm declined to provide additional details.

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