Merrill Lynch Does About-Face on Commission Ban
August 31, 2018 by Alex Padalka
Less than two years after Merrill Lynch decided to ban commission-based individual retirement accounts — and less than two months after the official death of the Department of Labor’s fiduciary rule, which had been the impetus for the ban — the wirehouse has reversed course, FA-IQ sister publication FundFire reports.
Starting Oct. 1, Merrill Lynch’s advisors will be able to choose from commission-based or fee-based IRAs, according to the publication. Brokers servicing IRA accounts will have access to all of Merrill Lynch’s brokerage products aside from annuities, FundFire writes.
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The firm doesn’t intend to reverse any other changes it made in anticipation of the DOL’s rule, the Obama-era regulation that purported to require retirement account advisors to put clients’ interests first and had gone into partial effect last summer. Those changes had included cuts to the number of available mutual funds in IRAs and increased due diligence, according to the publication.
Yet the wirehouse is also gearing up for the SEC’s proposed Regulation Best Interest, which many in the industry view as more lenient than the DOL’s rule, FundFire writes.
To that end, Merrill Lynch intends to add new disclosures, such as client relationship summaries, fee breakdowns and comparisons among different types of account options, according to the publication. The decision follows a 60-day review of comments from advisors and clients as well as regulatory guidance, FundFire writes.
“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,” said Andy Sieg, head of Merrill Lynch Wealth Management, in a statement cited by FundFire.
The move follows the June decision by the Fifth Circuit Court of Appeals to officially vacate the DOL’s fiduciary rule. In October 2016, when the DOL’s rule was still scheduled to go into effect the following April, Merrill Lynch said it would stop offering commission-based IRAs, in part to help its brokers act in their clients’ best interest. Merrill Lynch was the first large brokerage to do so, and many of its rivals, most importantly Morgan Stanley, opted instead to offer their brokers the option of commission-based and fee-based accounts. By May 2017, with the fate of the DOL’s rule less certain, Merrill Lynch relaxed its stance and said it would give brokers and clients more flexibility, including offering a “limited purpose brokerage IRA,” according to a memo seen by FA-IQ at the time.
By reintroducing commission-based accounts, Merrill Lynch also intends to assess its supervisory procedures on brokerage accounts and on the decision-making involved in choosing between advisory and brokerage accounts, FundFire writes.
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