Will BAML's new fiduciary service make big contribution to its DC business?

Company gears up to compete against registered investment advisory firms, woo wirehouse brokers

Mar 23, 2012 @ 1:37 pm

By Darla Mercado

Bank of America Merrill Lynch continues to ramp up its retirement plan offerings, adding fiduciary services in an effort to attract and keep plan advisers.

The new service will be available to plans with at least $25 million in defined-contribution assets and their retirement plan specialist advisers. Bank of America Merrill Lynch itself will be providing the fiduciary service under Section 3(21) of the Employee Retirement Income Security Act of 1974, allowing the firm to act as a co-fiduciary and share the responsibility with the plan sponsor or the adviser who sold the plan.

This arrangement, available next month, allows the financial adviser to work with the plan sponsor on investment menu design and plan selection.

The 3(21) service still leaves decisions up to the plan sponsor; neither Bank of America Merrill Lynch nor the adviser will take full discretion, said Kevin Crain, head of institutional retirement and benefit services for BAML.

Adding this degree of service is the latest step BAML is taking to expand its retirement plan business. Last year, the firm came out with its specialized Defined Contribution and Global Institutional Consulting designations, which are held by about 250 BAML advisers.

The firm expects about 30 to 50 advisers to sign onto the program in the first year and that it will remain limited to selected specialist advisers.

Fees for the fiduciary program can range from the low single digits in basis points to a maximum of 60 basis points, depending on the asset size of the plan.

Further, it won't be limited to plans that use BAML as their record keeper.

Mr. Crain also expects the program to give BAML a leg up in recruiting plan advisers, particularly as they compete with other wirehouses and regional registered investment advisory shops.

“There are advisers who are interested and are coming from wirehouse firms where they have similar services, but we have the ability to do more full-service administration and integration,” he said. Merrill Lynch is also taking aim at RIAs who don't have the resources to provide greater service to their plan clients.

Recruiter Danny Sarch noted that wooing large retirement advisers is easier said than done. Even blocks of midsize plan business can be a major effort to move from one firm to another.

“It's not done lightly, and when the business moves, it moves as a group — a ton of assets depart,” he said.

As a result, the additional fiduciary services are a feather in BAML's cap, but not the kind of development that will have advisers rushing to move plan assets en masse.

“I give them credit for improving their offering, but I'd be shocked if this is something that makes advisers say: ‘Now I have to go to Merrill Lynch,'” Mr. Sarch said.

But the additional services were designed to keep BAML's retirement plan advisers happy and more likely to stick around.

“We did a lot of work to get the $10 million-[in plan assets]-and-up advisers,” Mr. Crain said. “This service was the last step for these financial advisers — the last demand they had to complete the picture and service the DC client as broadly as they possibly could.”


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