J.P. Morgan moves ahead on dropping retirement commissions

Clients will be moved to self-directed accounts; bank may kill shift if DOL rule is dropped.

Although the fate of the Department of Labor fiduciary rule remains unclear, J.P. Morgan Chase & Co. is moving ahead with its plan to drop commissions in retirement accounts that use a financial adviser, according to a report in The Wall Street Journal.

The New York bank told some wealth management customers with individual retirement accounts that as of April 7 their “financial adviser will no longer be able to provide investment guidance,” according to a letter sent to clients. Affected clients will be moved automatically to a self-directed retirement account on that date, the letter said.

If the DOL rule is not implemented as planned, J.P. Morgan said in its letter that “it may not proceed with this transition” of accounts.

About 5% of J.P. Morgan’s $1.1 trillion in wealth management assets are held in retirement accounts, and only those that are charged commissions are affected by the change, a bank spokesman who also confirmed the letter told the Journal.

J.P. Morgan said in November that it would stop accepting commissions in retirement accounts in an effort to avoid the more-stringent compliance standards required under the rule. The bank said affected retirement clients in its Chase Wealth Management, Private Bank and J.P. Morgan Securities units would be steered toward accounts where they manage the investments themselves or accounts that charge fees based on a percentage of assets, which could be costlier for those who trade little.

Most of J.P. Morgan’s clients in recent months were given the choice of moving to a fee-based account or a self-directed option, the bank’s spokesman said. Those who elected to move to an account where they manage their own investments received letters recently, the spokesman said, while others who haven’t made a decision were also issued the notice.