Merrill Lynch may be positioning itself for more commission flexibility in the future

The wirehouse said its advisory platform will be the go-to regardless of what happens with DOL fiduciary rule, but a modification or repeal of the regulation could lead to more flexibility

Mar 10, 2017 @ 2:37 pm

By Greg Iacurci

Merrill Lynch's announcement that it may offer commissions in retail retirement accounts in limited circumstances may be an indication that it is giving itself some flexibility in case the Department of Labor's fiduciary rule is repealed, according to some observers.

"If that DOL rule get rescinded entirely, you'll see more than what they're doing now happen," said Ron Edde, president and chief executive of recruiting firm Millennium Career Advisors.

As a quick recap: Merrill Lynch had announced it October, prior to the result of the U.S. presidential election, it was eliminating commissions in advised brokerage IRAs come April 10, the initial compliance deadline for the DOL fiduciary rule.

Merrill touted its wholesale shift toward advisory, or fee-based, accounts as a move to cater to clients' best interests. It also carries the benefit of helping avoid what are seen as some of the more onerous, and riskier, parts of the regulation, which raises investment-advice standards in retirement accounts.

On Thursday, Merrill's wealth management head, Andy Sieg, told the firm's 14,000-plus advisers that the firm would still be using its investment advisory platform as the "primary vehicle for delivering ongoing advice and service for our clients' retirement accounts," but indicated there "may be limited situations in which a fee-based arrangement would not be in a clients' best interests."

While Merrill hasn't made any concrete decisions, and it appears the vast majority of transactions will still occur in an advisory capacity under the DOL rule, some see an implication that there may be additional loosening in the future if the DOL rule is ultimately modified or delayed, depending on the outcome of the ongoing review of the rule directed by the Trump administration.

"If the rule's not in place, then you start thinking maybe we can be a little more flexible because we don't have to satisfy a hard-line rule," said Jamie Hopkins, a professor in the retirement income program at The American College of Financial Services. "So we can be a little more flexible than we otherwise would have to under a specific regulation."

However, Merrill Lynch can't turn back from some of the changes it's already made, regardless of what happens with the rule, Mr. Hopkins said.

A Merrill Lynch spokeswoman declined comment beyond what was contained in the firm's announcement yesterday.

Mr. Sieg indicated that some product restrictions currently effective for retirement brokerage accounts, such as those on mutual funds, will remain in place regardless of what happens with the rule.

Merrill's potential softening on commissions may be in situations involving private equity and concentrated stock positions, for example, people familiar with the matter said.

"I think Merrill has made a distinctive choice in the market. They've made a clear determination, they don't want to use the [best-interest contract exemption]," said Denise Valentine, a senior wealth management analyst at Aite Group, referencing what many view as the most onerous aspect of the regulation.

Ms. Valentine says she doesn't see Merrill's recent announcement as a reversal of its original position, but rather as a "window to potentiality" that there may be a few product-specific changes.

If the DOL rule were to be modified and "opened up a little bit, it's conceivable [Merrill] may tweak some things here or there," Ms. Valentine said, adding that "they have not by any means moved away from their intentions."

"You may look for a door to be able to give [clients] what they want rather than see them leave," she added.

While the DOL made it tougher for firms to offer commission retirement accounts relative to advisory accounts in its rule, the agency acknowledged there are certain situations in which commissions are actually in a client's best interests.

Merrill Lynch was the first, and only one of a few, brokerage firms to announce a wholesale shift from commissions. Two of its wirehouse peers, Wells Fargo and Morgan Stanley, said they would allow both advisory and brokerage IRAs. UBS has yet to make a public announcement either way.

"They took an extreme view, they were way ahead … and had to retreat a little bit," said Danny Sarch, founder and owner of recruiting firm Leitner Sarch Consultants.

"I think there's definitely a population of clients and their advisers who wanted additional flexibility, so that's what they're doing," he added.


What do you think?

View comments

Recommended for you

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Upcoming Event

May 30


Adviser Compensation & Staffing Workshop

The InvestmentNews Research team will present exclusive data and highlights from its bellwether benchmarking study that will identify best practices for setting and structuring compensation and benefits packages throughout your... Learn more

Featured video


Behind the scenes of InvestmentNews' Best Places to Work

Benefits and vacation policies are important for hiring top talent, but giving employees a sense of ownership in decision-making is among the most important qualities, editor Fred Gabriel says.

Latest news & opinion

Finra anticipates oversight role for SEC advice rule

CEO Robert Cook says one area for examination could be the proposed requirement that brokers act in the best interests of their clients.

IBDs with the most CFPs

Here are the 10 independent broker-dealers that employ the most certified financial planner professionals.

Why we must create a more diverse and sustainable financial planning profession

CEO explains how, why a firm should commit to conscious inclusion.

Pope Francis wants financial advisers to work like fiduciaries

Vatican bulletin admonishes advisers who act against the best interests of their clients.

States trying to save DOL fiduciary rule appeal rejection of effort to intervene

California, New York, Oregon ask for rehearing by full 5th Circuit Court of Appeals.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print