In Reversal, Merrill OKs Retirement Account Commissions in 'Limited Situations'

Wealth chief Andy Sieg shares details on the cases in which advisors can charge commissions via BIC

A Merrill Lynch office (Photo: AP) A Merrill Lynch office (Photo: AP)

Two months after Merrill Lynch told its Thundering Herd that it would explore “options” for clients who might benefit from commissions in retirement accounts, the wirehouse has filled in the details.

Merrill says it assumes it needs to conform to the new Department of Labor’s fiduciary standard by June 9 — but that deadline is increasingly in doubt.

Still, the wirehouse told its 14,000-plus registered reps that they could take a non-fee-based approach in “limited situations,” according to Andy Sieg, who leads the wealth management unit.

First, it is adding products to its Investment Advisory Platform. Advisory share class annuities will be available by May 31; hedge funds, new-issue CDs and market-linked investments should be rolled out soon.

Merrill is also helping clients move from existing brokerage IRAs to Investment Advisory accounts with “pricing flexibility, including rebates on mutual fund share class exchanges,” Sieg told the Thundering Herd in a memo.

The firm’s tweaks to its interpretation of the DOL rule make sense, according to recruiter Mark Elzweig. "There are a lot of moving parts here. The rule itself is more than 1,000 pages long … As long as the rule places firms squarely in the cross hairs of plaintiffs’ attorneys, their flexibility is limited," he explained.

"Advisors will welcome any changes that expand their options in handling retirement accounts," explained Elzweig, who is based in New York.

Starting June 12, a limited purpose brokerage IRA will also be available to clients. It can initially be for cash and bank deposits only, but later will include a “limited product set, such as money funds, brokered CDs and concentrated stock positions (i.e., employer rollovers or transfers).

“For these limited situations, we will use the Best Interest Contract exemption,” the executive explained. High-net-worth clients — with over $50 million of assets — will be able to buy hedge funds and private equity via the BIC exemption.

“Any brokerage options to which the BIC applies will carry some additional requirements and responsibilities for advisors,” according to Sieg.

Merrill reminded its reps that securities bought or held in retirement brokerage accounts before June 9 will be covered under its Legacy Asset Exemption.

“That means that existing positions as of June 9 can remain in brokerage, but no new purchases can be made in those accounts,” Seig said.

The firm is also creating a Temporary Restricted Account, a “transition” retirement account for holding new assets and securities coming into the firm prior to the client and advisor’s choosing of a suitable investment platform.

“It is also a status for account terminations from an investment advisory program. Commissions will not be charged, and Product Credits will not be earned,” he added.

Meanwhile, the industry is waiting to see what the Trump Administration does next when it comes to DOL. Labor Secretary R. Alexander Acosta indicated Thursday that halting the fiduciary rule’s June 9 compliance date is a top priority, with published reports saying he’s looking for a way to freeze the rule that will “stick.” 

"Hopefully a new crop of regulators will promulgate rules that will allow advisors and clients more freedom to choose their business models and investment programs," said Elzwieg.

--- Check out Morgan Stanley Could Cut FA Comp for Vanguard Funds: Report on ThinkAdvisor.

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