Despite new review of DOL fiduciary rule, firms are sticking with higher standard of care

Firms have spent more than a year and millions of dollars preparing for the rule. Now, they have to wait and see what a final rule may look like.

Feb 6, 2017 @ 1:46 pm

By Bruce Kelly

+ Zoom

With the Department of Labor's fiduciary rule now shrouded in uncertainty, large brokerage firms are taking a step back to understand what potential options they may have if the rule changes or simply goes away altogether.

The final version of a memo sent by President Donald Trump on Friday to the DOL directed the agency to review the sweeping investment-advice rule but did not contain an explicit delay of the April 10 implementation date.

(More: What you need to know about Trump's plan to halt DOL fiduciary rule)

The memo instructed the DOL to “prepare an updated economic and legal analysis” to determine whether the rule was likely to harm investors, disrupt the industry, or cause an increase in litigation and the price of advice.

The memo said that if the DOL concludes the regulation does hurt investors or firms, it can propose a rule “rescinding or revising” the regulation.

Firms have spent more than a year and millions of dollars preparing for the rule, which would require broker-dealers act in the best interests of clients when working with retirement accounts. Now, they have to wait and see what a final rule may look like. Advisers have been broadly criticized by consumer groups and others for selling clients high-commission products in their retirement accounts.

Many broker-dealers, however, appear to be moving forward to prepare for some, if not most, of the changes in operations that the DOL fiduciary rule would have created.

Merrill Lynch, which said in October it would no longer offer new, advised commission-based IRAs starting in 2017, began communicating with its advisers about potential changes to the DOL fiduciary rule in a Jan. 20 memo.

In the memo, Andy Sieg, head of Merrill Lynch Wealth Management, told advisers that Merrill will continue to implement a heightened standard of care for delivering personalized investment advice, especially when it pertains to retirement accounts.

“This is consistent with our overall strategic direction and what our clients are asking for,” according to the memo. “Depending on what is announced, we may need to adjust the timelines for certain operational changes we have announced to ensure an orderly transition and a good client experience.”


“It is difficult to predict the exact developments that will occur in the coming days, and you can expect continued speculation in the media,” Wells Fargo Advisors stated in a memo to its advisers on Friday. “We do believe some form of fiduciary standard or obligation may eventually be implemented, whether it's under the DOL or a different agency.”

“We will continue to move forward with many of the initiatives we have underway, reflecting our ongoing commitment to raising the standard of care we provide our retirement and non-retirement clients,” Morgan Stanley spokeswoman Christine Jockle said in an email.

“If indeed the administration does take some form of action, we will be taking some time to review and assess the impact to the firm, our advisers and investors,” wrote Jacquelyn Marchand, a spokeswoman for Commonwealth Financial Network. Like Merrill Lynch, Commonwealth Financial Network in October said it was doing away with commissions in retirement accounts and said it would stop offering commission-based products in IRAs and qualified retirement plans.

In an internal statement from Friday, LPL Financial said it “continues to believe a best interest standard is appropriate for our industry.”

“We also believe that a consistent approach to disclosure, compensation and mitigation of conflicts of interest is the right path forward for our industry,” according to the statement. “We will continue to work with the Administration and Congress to ensure the industry serves the best interests of investors.”


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Oct 17


Best Practices Workshop

For the fifth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video


Calvert's John Streur: How the Trump administration will impact socially responsible investing

President Donald J. Trump's environmental policies have inspired socially responsible investors to take action, according to John Streur, president and CEO of Calvert Research and Management. But the policies could have negative long-term effects.

Latest news & opinion

The appeal and pitfalls of holding unconventional assets in retirement accounts

While non-traditional asset classes held in individual retirement accounts may have return and portfolio diversification benefits, there are "unique complexities" that limit their value for most investors.

Wells Fargo's move to boost signing bonuses could give it a lift

Wirehouse is seen as trying to shore up adviser ranks that took a hit after banking scandal

New Jersey fines David Lerner Associates for nontraded REIT sales

Firm will pay $650,000 for suitability, compliance and books and records violations.

Report predicts $400 trillion retirement savings gap by 2050

Shortfall driven by longer life spans and disappointing investment returns.

Wells Fargo will ramp up spending to lure brokers

Wirehouse, after losing 400 brokers in first quarter, is bucking trend among rivals who have said they are going to cut back on spending big bucks recruiting veteran advisers


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print