SEATTLE — A wirehouse, two of the largest independent broker-dealer networks and one of the biggest IBDs have agreed to provide simplified fee tables to clients, more than doubling the number of firms that will be using the standardized disclosure format.
Merrill Lynch, Cetera Financial Group, Ladenburg Thalmann and Voya Financial Advisors signed on to the North American Securities Administrators Association’s model fee disclosure schedule, NASAA announced this week. The 14 firms covered by the announcement will bring the total number of firms giving clients the standardized list of expenses to 27.
The fiduciary rule, along with the threat from discount firms and robo advisors, has forced many firms to cut fees to stay competitive. The rule has also led to calls for better cost transparency. Representatives from four firms, FINRA, FSI, SIFMA and state regulators designed the table after convening a working group in 2014.
While the state securities regulators who are members of NASAA expect that more firms will adopt the simplified format, they acknowledge that industry acceptance hasn’t been as speedy as desired.
“There has not been the adoption of firms on the fee table that we had hoped,” NASAA Broker-Dealer Section chairman Bryan Lantagne said in a presentation at the organization’s annual conference. He praised companies that have joined the program, reading off their names before leading a round of applause.
“By next year, when we meet in the beautiful state of Alaska at the fall conference, we will have most, if not all, of the broker-dealers on board,” Lantagne said. “This is something we can do, but we can’t do it alone.”
CLIENTS OUT OF THE LOOP
The fee tables, which look similar to nutrition facts on food packaging or charts disclosing credit card fees, cover all miscellaneous charges but don’t include commissions or advisory fees. Participating firms provide the tables to new and prospective clients and make them easily accessible on their websites.
More than half of clients surveyed by NASAA in 2015 either didn’t know their brokerage firm collected service and maintenance fees or thought they didn’t charge them at all.
NASAA’s 2015 study showed wide support among clients for a simple chart of all relevant fees and a direct link on their brokerage firm’s website to such charts. At the time, however, fewer than 10% of clients said their firm provided them with either.
“I personally think this is one of the best achievements I’ve seen NASAA lead to completion in 18-plus years of direct and indirect involvement in NASAA,” John Cronin, LPL’s head of state government relations, told an audience of regulators, industry advocates and lawyers. “It was a true effort of collaboration between NASAA and the firms and FINRA, and it was not at all easy to overcome all of the challenges.”
Cronin added, “I hope in the future it is a sign of what we can accomplish.”
NOTE OF OPTIMISM
LPL, Morgan Stanley, Prospera Financial Services and Signator Investors were the first to join NASAA’s agreement, after sending representatives to its working group. Nine other firms, including Fidelity Investments, the Advisor Group BDs and Commonwealth Financial Network, signed on earlier this year.
“This is important to investors because this goes to their entire return for what they’re going to get from their investment,” says NASAA President Joe Borg. “I think this will be an impetus for others to come on board. Everybody should be in the same box.”
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