DOL fiduciary rule will impact less than 10% of Bank of America wealth assets, CFO says

Move to Merill Lynch One platform will blunt regulation's impact

Apr 14, 2016 @ 11:23 am

By Christine Idzelis

The Department of Labor's fiduciary rule will impact less than 10% of the $2 trillion in assets at Bank of America Corp.'s wealth management business, chief financial officer Paul Donofrio said Thursday morning during a first-quarter earnings call with analysts.

Because its Merrill Lynch One platform is a "single fee" program rather than a commission-based model, the bank's significant investment in it “will really pay off” in implementation of the new regulation, Mr. Donofrio said. The regulation, released last week, shouldn't impact earnings this year, as firms have until January 2018 to become fully compliant, he said.

The Bank of America CFO's remarks on the DOL rule were related to the firm's global wealth and investment management unit, which has nearly $2.5 trillion in total assets, according to Bank of America spokesman Matthew Card. Excluding deposits and loans, the division has about $2 trillion in assets, he said.

The rule, which requires financial advisers to put their clients' interests ahead of their own when handling retirement accounts, has brokerage firms scrambling to assess the impact on their businesses. Brokers must disclose the commissions they charge to help protect investors from conflicts of interests which could arise if advisers feel incentivized to push more expensive proprietary investment products.

The regulation may accelerate brokerage firms' transition to fee-based business models.

(More: Coverage of the DOL rule from every angle)

Bank of America Merrill Lynch, the bank's full-service brokerage unit and the largest part of its wealth management business, saw revenue decline 0.5% to $3.6 billion from the fourth quarter, as market volatility hurt streams stemming from both fees and commissions, according to Mr. Card.

Most of its advisers have “hybrid” relationships with clients, meaning they may charge fees based on the amount of assets in their account or commissions for individual transactions, depending on their choice and need, according to the Bank of America spokesman. He said 55% have at least half of their client assets under a fee-based relationship.

While the number of advisers at Bank of America Merrill Lynch rose 1.6% from the first quarter of 2015, the total dropped by 86 people during the first three months of this year, to 14,413, mainly due to departures within its international segment that now only focuses on ultrahigh-net-worth investors in Latin America and Canada, according to Mr. Card.

Advisers can use Merrill Lynch One to provide goals-based wealth management services. The firm began offering the program in 2013. It had $531 billion in assets and 1.4 million accounts at the end of March, the spokesman said.

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