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Retirement Planning > Saving for Retirement > IRAs

Merrill Kills Mutual Fund Sales in IRAs; DOL Rule Sparks Move

By Janet Levaux

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Less than a month after telling its advisors that it would not offer new advised, or commission-based, brokerage retirement accounts starting in April 2017, Bank of America-Merrill Lynch (BAC) says effective immediately purchases of mutual funds in existing IRA accounts are no longer allowed.

Mutual funds can be bought in Merrill Lynch Investment Advisory Program accounts and non-retirement brokerage accounts.

For advisors, the shift means that commissions tied to mutual-fund sales in brokerage retirement accounts will no longer be part of their compensation plans.

“Decisions made regarding the DOL fiduciary rule are grounded in our strategy to provide best interest, goals-based advice to our retirement clients while preserving client choice. They also reflect our goal of ensuring that our advisors and our firm are best positioned to comply with the rule,” the wirehouse broker-dealer said in a statement.

The move – explained in a memo written by Frank McDonnell, head of Global Mutual Funds, and shared with advisors Tuesday – aimed to get Merrill Lynch’s “Thundering Herd” ahead of the regulatory curve.

“We are implementing this decision in advance of the DOL rule’s applicability date, to ensure as seamless and positive experience for our clients and advisors as possible,” the firm explained.

(Related: The BICE Is Not a DOL Fiduciary Get-Out-of-Jail-Free Card)

According to Merrill, clients looking for alternatives to commission-based funds in their IRAs can turn to the firm’s Investment Advisory Program (IAP), Merrill Edge Select Portfolios, the Merrill Edge self-directed channel and Merrill Edge Guided Investing (beginning in January). “Each of these offerings will be augmented on an ongoing basis to ensure choice for our clients,” it said.

Other Strategies

Also on Tuesday, Cambridge Investment Research joined a number of other broker-dealers who say they will continue to offer commission-based retirement accounts after the new DOL fiduciary rule goes into effect next year. The other firms that made this announcement recently include Raymond James Financial (RJF), Ameriprise Financial (AMP), Morgan Stanley (MS) and Cetera Financial Group.

The Fairfield, Iowa-based broker-dealer, which has some 3,000 affiliated advisors, says it plans to apply the Best Interest Contract provision announced by the DOL for some commission-based accounts, while the discretionary advisory business will be supported through level fee platforms.

Commission-based retirement accounts will be acceptable at Cambridge, however the commissions must be “levelized by each pre-defined investment category so that all similar investment options have the same compensation structure,” according to the independent broker-dealer.

“We think every firm should have a unique value proposition while serving the best interests of the investing clients. Serving the needs of the client must clearly be the highest priority, along with observing regulatory requirements …,” said President Amy Webber, in a statement.

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