Merrill to Unveil Tweaked DOL Plan This Week
Merrill Lynch plans to give brokers an update on new retirement account policies on Thursday, including what is being billed as some “platform enhancements” that will give brokers more flexibility in working with customers with commission accounts.
Merrill last October said it would ban brokers from selling commission-based individual retirement accounts in anticipation of the new fiduciary rule that the Department of Labor was putting into effect. Andy Sieg, who became head of Merrill’s wealth management empire in January, promised in March to modestly modify the policy, citing a Trump administration delay in implementation of the rule from April 10 to June 9.
He was also likely influenced by the fact that few competitors followed Merrill in absolutely barring commissions. Most said they would allow brokers to use an exemption in the fiduciary rule that permits commission-based accounts if brokers sign best-interest contracts with customers. That exposes brokers and their firms to potential class-action lawsuits if they are accused of violating the best-interest standard when guiding retirement investments or rollovers to IRAs from qualified employer retirement plans.
Because Merrill and its parent, Bank of America, remain vigilant about avoiding lawsuits, Thursday’s announcement is likely to focus on lower-fee products or reductions in existing fees on retirement products rather than a major policy change, said some brokers. Policies announced last year, such as a requirement that brokers receive internal accreditations attesting to their understanding of their fiduciary responsibilities and restrictions on mutual fund share classes that could violate “reasonable compensation” standards, will remain in effect, a person familiar with the plan said.
One veteran adviser said his complex manager told brokers to expect a discussion of enhancements to the retirement “platform” that will create additional options for working with clients. Merrill had earlier said that customers who didn’t want to pay a fee should be directed to other firms or to Bank of America’s discount brokerage arm Merrill Edge.
Although an outsized number of brokers jumped to rival firms with more liberal policies, Merrill’s hard-nosed fiduciary policy may not have been the primary motive, say brokers and recruiters, speaking on condition of anonymity. That may reflect Merrill’s longtime effort to focus brokers on servicing more affluent customers who are not put off by the prospect of a recurring fee rather than transaction-based commissions. For example, Merrill does not pay brokers or credit their grids for household accounts under $250,000, a higher bar than the $100,000 floor at Morgan Stanley.
In his March memo to brokers, Sieg acknowledged that “there may be limited situations in which a fee-based arrangement would not be in a client’s best interests,” a reference to the fact that commissions in accounts that make few trades could be less expensive than a fee.
He emphasized that the firm’s Investment Advisory Program remains its preferred choice. The firm as of March was servicing 537,000 advisory clients with $208 billion in IRAs, or more than half of its total IRA assets under management, he said.
A Merrill spokeswoman declined to comment on what might be announced.