Two years after it moved to end commissions in retirement accounts, Merrill Lynch is reversing course on Oct. 1. At the same time, it plans to provide more straightforward information to brokerage clients about fees and commissions, including a summary of programs and services and the associated costs.
The reason? Angry investors, and most likely unhappy advisors.
“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,” according the Andy Sieg, head of Merrill Lynch Wealth Management.
In October 2016, Merrill said it would no longer offer new commission-based brokerage IRAs through its advisors when the Labor Department’s fiduciary rule was set to kick off in April 2017. This, of course, was ahead of the November 2016 election of President Donald Trump, whose campaign promises included broad deregulation.
Merrill started to tinker with its retirement-accounts policy as the fiduciary rule came into effect (and the firm began to see the departure of some high-profile advisors), telling its Thundering Herd that it planned to explore “options” for at least some clients who might benefit from commissions in retirement accounts.
Analysts said this move, which included the launch of limited-purpose brokerage IRAs, represented a sea change for the firm; it came as the fiduciary rule seemed likely to be pushed back by 60 days (to June 2017).
“Regardless of the ultimate path that [Bank of America Merrill Lynch] chooses to take, Pandora’s box has been opened, and the fee discussion is now front and center for clients, so whether or not the fiduciary rule is implemented in its current state may be a moot point,” according to Brian Kleinhanzl and Michael Brown, CFA, of Keefe, Bruyette & Woods.
In early 2017, a J.D. Power survey found that close to 60% of full-service investors paying commissions likely would not stay with their current firm if they were forced to move into fee-based retirement programs. Merrill clients with roughly $100 billion assets opted for commission-based accounts rather than moving to investment advisory accounts.
* * *
Rival Morgan Stanley has hired Betterment Chief Marketing Officer Paul Halpern to serve as head of deposits and banking services for its Private Banking Group.
Halpern — who also has worked for Merrill Lynch as head of affluent and mass affluent marketing, and for Capital One, E*Trade and JPMorgan Chase — will partner with Paul Vienick, head of Morgan Stanley Online/Mobile and Digital Banking on the development of digital banking products and solutions. He’ll also focus on helping advisors boost sales of wealth management services, according to the firm.
“Paul is a talented financial services executive who has a strong background in full-service, financial advisor-centric business models,” said Eric Heaton, head of Morgan Stanley’s Private Banking Group, in a statement. “He has firsthand knowledge of the primary importance of the financial advisor in serving the broad requirements of clients.”
Morgan Stanley has 15,632 advisors with average 12-month fees and commissions of $1.105 million. Total assets for the full advisor force are $2.41 trillion.
“Having experienced a range of different models, it’s clear that the future of wealth management is the combination of industry-leading technology and world-class personalized financial advice,” Halpern said in a statement. “I look forward to working closely with financial advisors to help them broaden relationships with their clients, particularly in regard to the firm’s full suite of banking services.”
* * *
As departures continue at Wells Fargo Advisors in the wake of scandals at its parent company and within its own operations, the unit is reworking some of the leadership at its independent advisor channel — WFA Financial Network, or FiNet.
FiNet recently named Tim Boostrom — the former head of national recruiting for the indie channel — as the regional head of FiNet’s Southeast operations. Joe Gianino, who led FiNet’s business development group for nearly five years, was tapped as regional head of the Great Lakes.
According to Wells Fargo, the ex-head of FiNet in the Southeast — Charles Cornett — left for another firm. But the former Great Lakes manager — Jason McLaughlin — moved to a leadership role with the Private Client Group in Chicago.
Cornett is now the director of business development for BNY Mellon’s Pershing Advisory Solutions. He left the FiNet role a year ago — after more than 11 years at Wells Fargo — for a position at HighTower Advisors, according to his LinkedIn profile.
Advisors aren’t likely to join FiNet or other channels of Wells Fargo “until the bad news is flushed out” and Wells Fargo is out of the press, recruiter Jon Henschen said in an interview. “The market has to perceive that there’s a half-year-plus of no new press and then heal. Until then, the situation is very sketchy.”
A group of FiNet advisors managing about $675 million in assets recently left Wells Fargo to form its own RIA — Landsberg Bennett Private Wealth Management of Punta Gorda, Florida. The FiNet news comes about two months after The Wall Street Journal reported that Wells Fargo’s wealth management business is being reorganized.
As of June 30, Wells Fargo Advisors included 14,226 advisors. That’s down about 300 from a year ago and 173 from the prior quarter, though the firm says retirement is behind 80% of departures over the past 12 months.
Also in the second quarter of 2018, the bank accrued a $114 million expense to refund wealth-unit customers who had been overcharged over the last seven years, along with $171 million for foreign-exchange clients.