DOL fiduciary rule: Edward Jones changing stance on mutual fund commissions in IRAs

The brokerage cites "additional flexibility" granted by the DOL in recent guidance as a determining factor

Jun 7, 2017 @ 2:29 pm

By Greg Iacurci

+ Zoom

Edward Jones is reconsidering its ban on mutual fund commissions in individual retirement accounts under the Department of Labor fiduciary rule, and hopes to roll out a new account option by midsummer that would allow advisers to use such investments with clients in brokerage IRAs.

Edward Jones, which houses 15,000 advisers, last summer indicated it would disallow advisers from selling mutual funds on commission after the fiduciary rule took effect, absent more consistent pricing for products among asset managers.

However, citing "additional flexibility granted by the Department of Labor," the firm is changing its stance, at the same time the Trump administration is beginning a review of the rule, which raises investment-advice standards in retirement accounts.

"We believe we can structure a new account that will allow for mutual funds in a transaction-based IRA as the industry works to develop and implement long-term solutions," said spokeswoman Regina DeLuca-Imral. She referenced recent guidance from the Labor Department, including a recent round of [frequently asked questions] and a Field Assistance Bulletin, as a basis for the company's decision.

The new account would be active during the transition period for rule implementation, which runs from June 9 until January 2018, when the full scope of the rule is scheduled to take effect. However, the spokeswoman added: "The DOL has acknowledged in recently issued FAQs it may take longer [than Jan. 1] for the industry to implement fully compliant mutual fund solutions."

Several broker-dealers have already made changes to their investment offerings and compensation structures ahead of the rule's implementation in order to decrease their liability under the regulation.

Edward Jones earlier created a commission-based account, the Select Retirement Account, in response to the fiduciary rule. That account, which requires a $100,000 minimum investment, allows for purchases of stocks, bonds, certificates of deposit, variable annuities and exchange-traded funds, but not mutual funds.

The field assistance bulletin the Edward Jones spokeswoman referenced said the DOL will not enforce the fiduciary rule in the transition period, as long as companies are "working diligently and in good faith to comply" with the rule and its exemptions.

"There may be an assumption being made by some firms that the final rule scheduled to go into effect on Jan. 1 won't. And they're starting to look at restructuring some of their accounts in light of that possible change in policy," said Duane Thompson, senior policy analyst at fi360 Inc., a fiduciary consulting firm.


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