Merrill Reconsiders Commissions on Some Retirement Accounts

Wealth chief Andy Sieg, though, tells the Thundering Herd that restrictions 'remain in place, including [those] on mutual funds'

A Bank of America-Merrill Lynch office. (Photo: AP) A Bank of America-Merrill Lynch office. (Photo: AP)

With an anticipated 60-day delay to the Department of Labor’s fiduciary rule compliance date, Merrill Lynch appears to be altering its approach to commissions in retirement accounts.

In a memo shared with the firm’s 14,500-plus advisors and a conference call on Thursday, executives signaled that the company intends for the Thundering Herd’s retirement accounts to generally become fee-based, but with some exceptions.

Despite the “uncertainty in Washington,” the firm is “steadfast in its commitment to provide investment advice in our clients’ best interests, particularly with respect to their retirement accounts,” wrote Andy Sieg, head of Merrill Lynch Wealth Management.

As executives at the wirehouse have worked to meet the DOL’s requirements, they have come to recognize “that there may be limited situations in which a fee-based arrangement would not be in a client’s best interests,” Sieg said.

Thus, the wealth business is reviewing “those limited circumstances” and considering possible alternatives to its fee-based Investment Advisory Program for some clients “in a manner consistent with a higher standard of care,” he adds.

Merrill is “prepared” to implement its approach to the DOL rule next month. But the firm’s executives acknowledge that its delay “may provide us with additional time and flexibility as we work through these issues,” according to Sieg.

The wealth chief also told the Merrill advisors that product restrictions now in effect for retirement brokerage accounts will “remain in place, including restrictions on mutual funds.”

According to the wirehouse, the Thundering Herd has some 537,000 clients in its fee-based IAP, with $208 billion of client assets in IRAs, representing more than half of its total IRA AUM.

(Others products with restrictions include non-traded REITs, life insurance, health saving accounts, education savings accounts and some other special investors.)

Recently, Merrill has told its reps that it is updating its Institutional Retirement platform to conform to a fiduciary model and expected to provide details next week. It also says it is changing its mutual fund sales-charge waiver policy, including the ability to exchange “long-held C shares into A shares tax-free and with no additional sales charge” in both taxable and non-taxable accounts.

A national advertising campaign with a “putting client interest first” theme is expected to launch over the next three to four weeks.

Rival Approaches

Morgan Stanley has been telling its 15,700-plus advisors that many of its planned changes will happen regardless of what happens to DOL under a Trump presidency. The wirehouse has said its retirement account clients can work with commissions or fees in the future and that it will be lowering some charges for trades.

“With or without the rule, we fundamentally believe that serving our clients well and continuing to lead the industry forward require that we provide an increasingly higher standard of care for our clients across both retirement and non-retirement assets. To that end, and regardless of any potential delay, we will continue to move ahead in three important areas in the coming months,” explained Shelley O’Connor and Andy Saperstein, co-heads of the wealth management unit in a memo shared with advisors on Jan. 26.retirement glidepaths also will be used. 

Wells Fargo Advisors said in 2016 that it plans to keep offering commission-based retirement accounts. 

“WFA strongly believes that our clients deserve options when making their investment decisions. Therefore, we will continue to offer traditional commission-based retirement accounts leveraging the Best Interest Contract (BIC) Exemption, as well as advisory solutions,” the broker-dealer said in a memo sent to advisors in early-December, including those with Wells Fargo Financial Network, or FiNet, its independent channel.

“WFA is implementing several enhancements to help ensure we are meeting the DOL’s best interest standard when advising and servicing our clients’ retirement accounts,” the bank explained.

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