Two years after it moved to end commissions in retirement accounts, Merrill Lynch says it will reverse 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.
Clients with roughly $100 billion assets opted for commission-based accounts rather than moving to investment advisory accounts.
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.
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Janet Levaux
Editor-in-Chief Janet Levaux has covered the financial markets since 1991, with a focus on financial advisors since 2005. After graduating from Yale and the Johns Hopkins School of Advanced International Studies (SAIS), where she studied global economics, Janet worked as a freelance financial and business writer in Japan, and then as a reporter and editor for Investor's Business Daily and the Bay Area News Group in California. She earned an MBA in 2007 and since then has helped lead key ThinkAdvisor projects like its Neal-Award winning reporting on Ken Fisher, Luminaries awards program and Women in Wealth newsletter.
