Cambridge Investment Research Inc. and the Cetera Financial Group network are the latest broker-dealers to announce their strategies to comply with the Department of Labor's fiduciary rule, saying Tuesday that they will continue to pay both commissions and fees to advisers who work with clients' retirement accounts.
The past month has seen a steady roll call of major firms revealing their plans to deal with the new DOL rule, which raises adviser standards when providing retirement advice and takes effect next April.
Merrill Lynch kicked off the proclamations when it said it was scrapping new commission IRAs in favor of advisory accounts.
Last week, four more firms that house thousands of financial advisers showed their cards on the fiduciary rule. Morgan Stanley,
Ameriprise Financial Inc. and
Raymond James Financial Inc. said they would continue to offer commission in clients' retirement accounts.
Like Merill, Commonwealth Financial Network said it was making a wholesale shift away from commissions in IRAs and qualified retirement plans.
Cambridge, which has 2,821 producing independent reps and advisers under its roof, is in the final stages of building out the processes and tools designed to provide advisers the ability to customize their practices to their clients, said Amy Webber, president of Cambridge.
“This is the biggest change our industry has gone through in 40 years so we took a step back and tried to go forward without a knee-jerk reaction,” Ms. Webber said. “We want to be compliant and follow the rules, walking the path in the middle with four different channels we've developed. Other firms, like Commonwealth, are betting on something different.”
“What is best for the client can be presented in different manners,” she said.
“We're not ready to give up on that flexibility and open architecture,” she said, adding that Cambridge expects to spend $17 million to $20 million over several years on the effort to make the firm compliant with DOL fiduciary standard.
Cetera Financial, which is comprised of seven firms and approximately 9,000 reps and advisers, said in a memo from individual broker-dealer presidents to advisers Tuesday morning said that the Cetera firms have “every intention of continuing to offer commissions-based products, including mutual funds, in retirement accounts.”
That doesn't mean there potentially won't be changes in compensation at Cetera broker-dealers, according to the memo, which was given to
InvestmentNews by a Cetera executive.
“It should be noted ... that many of these products require a level of remediation by the sponsors in order to facilitate sales practices that meet the requirement of the fiduciary rule,” the memo said. “We remain confident that most sponsors are working diligently to facilitate such changes in time to meet the April deadline.”
Cambridge intends to apply the DOL's best-interest contract exemption provisions announced earlier this year for certain commission-based accounts, and discretionary advisory business will be supported through level fee platforms, the company said. While commission-based retirement accounts will be acceptable at Cambridge, the commissions must be level by investment category so that all similar investment options have the same compensation structure.
Cambridge has added two business models for advisers as part of its ramping up for the DOL: a small, managed account for clients with $25,000 or less and the BICE. Its other two models are for non-retirement investing clients and a level fee fiduciary account.
“To maintain the flexibility for advisers is the reason why we came up with the four paths,” said Colleen Bell, first vice president of fiduciary services at Cambridge. “We are not applying the DOL rules to non-retirement accounts but are preparing advisers for guidance in the future,” she said, noting that various regulators are eying a fiduciary standard to be the norm in the securities industry.
