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.
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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.”
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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.
In other news, Wells Fargo’s wealth management business is investigating complaints tied to gender bias, according to recent WSJ report.
Dozens of women have been interviewed, and there at least one human-resources complaint has been filed against Jay Welker — president of private bank and head of the wealth-management division since 2003 — over gender bias, the report explains.
According to the paper, some women with Wells Fargo’s wealth unit said Welker frequently referred to them as “girls” and told them to put on “big-girl panties.”
Wells Fargo is “committed to promoting diversity and inclusion in all aspects of our business,” bank spokeswoman Kathleen Leary told the WSJ.
“We value all of our Wells Fargo team members, and we take seriously any allegation raised by a team member, or against a team member,” she explained. “We ensure that concerns raised are thoroughly and objectively investigated, while taking measures to protect confidentiality. Once an investigation is complete we are committed to taking any appropriate action.”
(Wells Fargo did not return our requests for a statement or interview about the matter.) A group of 12 female regional managers of the wealth unit met in June to discuss their discontent, according to the WSJ. The other 33 regional leaders are men. All 45 report to seven male senior managing directors. At the June gathering, some managers said Welker had told them that women “should be at home taking care of their children,” the paper reported.
The women focused their meeting on how to increase female executives with the organization and created a series of recommendations that were then delivered to Welker and Tim Traudt, head of regional wealth management. Wells Fargo is working to host five women-focused wealth management internal events before year-end, which is ahead of the two it held last year, the WSJ says.
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Meanwhile, Advisor Group says it will speak with “at least one qualified woman candidate” when filling slots for vice presidents and other top executives. The group — which includes 5,000 independent advisors affiliated with FSC Securities, Royal Alliance Associates, SagePoint Financial and Woodbury Financial Services — adopted this policy as part of its the move to sign the Corporate ParityPledge, a program sponsored by Parity.org that aims to improve gender equality at the highest levels of business.
“Advisor Group is proud to count seven women among its leadership team of 16 executives [or 43%], and also supports hundreds of successful female advisors nationwide,” said President and CEO Jamie Price.
“We appreciate the diverse and valuable perspectives these female professionals bring and, in signing the ParityPledge, solidify our commitment to advancing their inclusion and advancement in the workplace. Advisor Group stands firmly in its employees’ and its advisors’ corners.”
Other recent measures taken by Advisor Group include its Women Forward initiative that seeks to bring in more female advisors via mentorship and other activities, its yearly women’s conference W Forum and its partnership with the networking group W Source. According to the Securities Industry and Financial Markets Association, about 19% of all advisors are women. Cerulli Associates sets the number of female advisors at 16%, or about 50,000 of the roughly 300,000 advisors nationwide. On a positive note, 24% of new advisors are women.
“Parity.org was founded to correct the stark reality of gender imbalance at the very top of companies today,” said Parity.org CEO Cathrin Stickney, in a statement. “While women represent 51% of the population, barely 20% of S&P 500 corporate executive teams and boards are represented by women.”
“We are thankful for organizations like Advisor Group that are willing to become a role model for change,” she added. “We believe their public commitment and example will help us realize exponential progress toward reaching parity at the top.”
Advisor Group, which works with about $190 billion in client assets, is owned by Lightyear Capital and PSP Investments. Price joined the firm as its CEO in late 2016 after Erica McGinnis departed year during the firm’s transition from being part of publicly traded AIG to private ownership.
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Broker-dealer HD Vest says it is working with technology provider Envestnet to gives its 3,700 affiliated independent advisors more ways to grow their practices.
The partnership means the advisors using HD Vest’s platform can now access Envestnet tools for model management, proposal generation, unified managed accounts (UMAs), overlay models and online reporting, as well as information about client allocations and risk parameters.
“Our mission is to give independent advisors a holistic view of each client’s overall financial picture, which is enhanced by Tax Smart Investing insights — a key industry differentiator,” according to HD Vest CEO Bob Oros. “Envestnet’s solutions are the latest additions to our ecosystem of the best technology and tools from across the industry, which advisors can use to start more holistic financial services conversations with clients.”
The Envestnet resources that have been customized and branded for HD Vest advisors include:
- VestAdvisor Discretion/Non-Discretion, an Advisor as Portfolio Manager (APM) program for portfolio models;
- VestAdvisor Select, a wrap-fee program with mutual funds and exchange-traded funds; and
- VestStrategist, a discretionary Unified Managed Account (UMA) program with separately managed account (SMA) models.
Also, HD Vest advisors working with retirement plan sponsors can use Envestnet | Retirement Solutions’ Compliance Advantage platform that aggregates data from HD Vest’s full product suite.
“As the industry continues to evolve, our solutions and services can be personalized to help advisors of any practice size meet the needs of their clients,” said John Yackel, head of Institutional Business Development at Envestnet, “ in a statement. “By working with HD Vest and its advisor partners to help them optimize their practice operations, we can empower them with the tools to strengthen client outcomes as well as meet their business goals,” Yackel explained.
Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at firstname.lastname@example.org.