JPMorgan Chase & Co. will stop charging clients commissions on individual retirement accounts to comply with new Labor Department rules scheduled to take effect next year.
The bank yesterday began mailing letters to clients about the change being made to its retirement-account offering, posting the communication online this morning, according to a spokesman. JPMorgan is pushing ahead with the decision after the surprise results of the U.S. presidential election cast the Labor Department's new fiduciary rule into limbo.
The wealth-management industry has spent months analyzing the Labor Department's 1,023-page fiduciary rule, which requires financial advisers to put their clients' interests ahead of their own when making recommendations for their retirement accounts.
While some see potential for the regulation to be thrown out under a Donald Trump administration, for now at least, it's still on the books.
"Our communications plans and client outreach efforts were planned months ago and we are operating under the current state of the rule," the spokesman said.
Firms' compliance strategies largely have centered on whether or not to keep charging commissions for each transaction made within IRAs. The fiduciary rule seeks to prevent conflicts of interest where an adviser may make an investment recommendation that charges a higher commission for personal gain, eroding the client's savings.
JPMorgan's clients may choose retirement accounts that are professionally managed under a fee-based arrangement, or a self-directed option that allows them to manage their own investment strategy, according to the communication posted online.
Last month, Bank of America Merrill Lynch and Commonwealth Financial Network announced they were banning commission-based retirement accounts because of the DOL fiduciary rule. Other brokerage firms, including Morgan Stanley, have said they will continue to offer commission-based IRAs, using the regulation's best-interest contract exemption.
Firms must begin implementing the new regulation in April and become fully compliant by January 2018.
“Overall, these regulations were designed to help protect investors by ensuring that financial institutions act in their clients' best interests,” JPMorgan told its clients.