Merrill Lynch brings back commission-based retirement accounts
Merrill Lynch is reversing a ban on commission-based retirement accounts which it had introduced in response to the Department of Labor's now-defunct fiduciary rule, according to a person familiar with the matter.
The policy had been under review since a federal appeals court vacated the fiduciary rule earlier this year. Some Merrill brokers may applaud the decision as the ban had in their view hindered how they could serve clients.
"In response to client feedback, we're announcing steps today that will provide our clients with greater choice and flexibility, while maintaining our support for a best interest standard for investment advice across all accounts," Andy Sieg, head of Merrill Lynch Wealth Management, said in a statement.
The firm will reintroduce brokerage capabilities in individual retirement accounts by Oct. 1, according a person familiar with the matter.
Merrill Lynch will also review its supervisory routines for clients' brokerage activity. The firm also intends to provide additional disclosure information about the brokerage relationship to clients.
The firm is also monitoring the SEC's progress on its proposal to update standards of conduct for brokers and advisors, known as Regulation Best Interest. Merrill Lynch will update its brokers on these developments at a later date.
Fiduciary advocates lament the absence of the term from the SEC's rule, which they say fails to move beyond FINRA’s existing suitability standard, while the brokerage sector sees the proposal as a welcome jump in oversight.June 15
The policy reversal may please some brokers who felt constrained after losing the option to offer clients a brokerage option for retirement assets. In the period after the firm first announced the policy in October 2016, several teams left Merrill Lynch for rivals such as Morgan Stanley and Raymond James which had declared they would maintain a brokerage option.
Merrill Lynch took what some saw as an aggressive and welcome approach toward complying with the Labor Department's regulation, saying it would not use the so-called best interest contract exemption, or BICE, in order to offer clients a brokerage option in retirement accounts. Clients could instead use Bank of America's self-directed platform. The company has also introduced a robo advisor option since the fiduciary rule went into partial effect in June 2016.
Merrill Lynch's positioning on the fiduciary rule was significant not least because of the firm's long history, brand recognition and size. It currently has roughly 14,800 advisors overseeing $2.3 trillion in client assets.
Of course, Merrill Lynch was not alone in adopting new policies to comply with the now defunct regulation, with many firms cutting a number of funds available on their platforms for compliance reasons.
Morgan Stanley, for example, announced it would use the best interest contract exemption.
And UBS tweaked how it calculates advisors' compensation on client's retirement assets. The firm recently told its roughly 6,800 advisors that it will keep the policy in place while it waits to see what the SEC does with its proposed best interest regulation.
The SEC is currently reviewing the proposal after soliciting in thousands of public comments on the regulation.