Merrill Lynch's revised fiduciary plan relaxes ban on commissions

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Merrill Lynch is relaxing restrictions on offering clients commission-based accounts, the company said in an internal memo. The decision is a reversal from its earlier strategy which had excluded such accounts as part of the firm’s plans to comply with the fiduciary rule.

"We have analyzed the limited situations where recommending a fee-based arrangement might not be in a client's best interest and have considered alternatives [to the firm's Investment Advisory Program] for these situations," Andy Sieg, head of the wirehouse, told employees Thursday.

The firm had previously indicated that it was re-evaluating policies that it first laid out in October. Merrill was one of the first firms to say whether it would continue to offer clients commission-based retirement accounts under the fiduciary rule, and framed its decision within its larger goal of raising the standard of client care. Nearly all of its major competitors went in the opposite direction, opting to continue offering commission-based accounts under the fiduciary rule's best interest contract exemption.

In recent months, the wirehouse lost many advisers to rivals. Some of the departing brokers cited Merrill's fiduciary policy as the primary catalyst for their move.

"We want to be able to rise to whatever the occasion is based on the client's needs," said Patricia Bennet, who left Merrill for Raymond James. She generated approximately $1 million in annual revenue, according to her new employer.

In March, three teams overseeing more than $575 million left for Morgan Stanley because the rival wirehouse said it would maintain its commission-based offering.

Merrill's total headcount dropped by 145 brokers year-over-year for the first quarter. Sieg, who became head of the wirehouse earlier this year, has said that he wants to grow the firm’s headcount.


Among the ways Merrill plans to offer greater flexibility to advisers, the firm will roll out a limited purpose brokerage IRA in June; it will use the fiduciary's best interest contract exemption for this offering. Other wirehouses, regional firms and IBDs have also said that they would use that exemption to continue offering clients commission-based retirement accounts.

Merrill Lynch advisers will also have access to annuities within IAP by the end of May. The firm is also exploring offering additional investments through that program, including hedge funds and new-issue CDs.

The fiduciary rule's implementation date was delayed by 60 days so that the Department of Labor could complete a review of the regulation ordered by President Trump.

Merrill Lynch is "operating under the assumption that the applicability date of the Department of Labor’s fiduciary rule will be June 9," Sieg told employees, adding they can expect additional support as June approaches.

"Foremost in our mind is the need to ensure you have the resources and support necessary to provide investment advice in our clients' best interests with respect to their retirement accounts," he said.

The Labor Department has not indicated whether it will rescind or revise the regulation. But some experts and industry observers think that the regulation will likely go into effect with few changes due to the onerous nature of the rule-making process.

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Fiduciary Rule Compliance Wirehouses Andy Sieg Merrill Lynch