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December 22, 2016 at 07:00 PM
Wells Fargo Advisors recently explained to its employee and independent registered reps that it plans to keep offering commission-based retirement accounts. The news comes as legal and political challenges to the Department of Labor’s new fiduciary standard — set to begin going into effect in April — continue.
“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.
Rivals such as Morgan Stanley and Raymond James also are taking such an approach to DOL, while Merrill Lynch is ending commissions in new retirement accounts. Merrill says clients can, for instance, move their brokerage IRA accounts to Merrill Lynch One, its investment advisory program that offers a single, asset-based fee schedule.
“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.
In terms of how the presidential election results will affect the new fiduciary standard, “None of us can say with certainty what will actually happen. Many different types of scenarios are possible, and we are planning for all of them. In the meantime, we will continue preparing for an April 2017 implementation” of the DOL fiduciary rule, it added.
Wells Fargo’s roughly 15,100 advisors and 3,900 licensed bankers have some $1.5 trillion in client assets.
Talk to Clients, Document That Discussion
The firm’s retirement clients will receive a new retirement account policy statement in the second quarter of 2017. “Before this mailing occurs, it is critical that FAs have conversations with clients and document their discussion in SmartStation Client Dashboard,” according to the broker-dealer.
Wells Fargo says it also is creating “a standardized process to document and help demonstrate when 401(k)-to-IRA rollovers and IRA-to-IRA transfers are in the client’s best interest.”
In addition, WFA says it has developed a “firm-approved list of available investments for retirement accounts” based on research from Wells Fargo Investment Institute and other groups within the bank.
“In the coming weeks, you will continue to receive more detailed information outlining specific steps to take before […] April 10, 2017,” it concluded in its memo.
Merrill’s No Mutual Funds Policy
The DOL rule is keeping firms and their advisors busy.
For instance, 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 said Nov. 2 that 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 (IAP) accounts and nonretirement 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.
“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.
According to Merrill, clients looking for alternatives to commission-based funds in their IRAs can turn to the firm’s 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.
Commonwealth Financial Network said in late October it would no longer offer commission-based products in retirement plans as of Dec. 31.
