Merrill Lynch outlines possible tweaks to its fiduciary plans

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Merrill Lynch is moving ahead with aspects of its fiduciary plans while partially walking back a previous pledge to cease offering commission-based retirement accounts ― a policy change the firm's chief had previously hinted at.

"As we've worked over the last year to meet the requirements of the DoL's conflict of interest rule, we've recognized that there may be limited situations in which a fee-based arrangement would not be in a client's best interests," Andy Sieg, head of the firm, said to advisers in a memo viewed by Financial Planning.

The firm detailed its plans in a conference call on Thursday with advisers. Feedback from advisers and clients prompted the firm to revisit its policy on commissions, according to people familiar with the matter.

The Department of Labor’s proposed delay "may provide us with additional time and flexibility as we work through these issues,” Sieg said in the memo.

Sieg told Financial Planning last month that Merrill could make "operational changes" if the Labor Department's regulation was delayed or overturned. Sieg demurred when asked if Merrill would still phase out commission-based retirement accounts.

"It's very hypothetical. We're going to operate on a best interest standard. We feel very comfortable with the approach we have articulated and believe it will serve us in good stead with what is to be the law on April 10," Sieg said.

The Labor Department has since formally proposed postponing the rule's implementation date by 60 days.

The department is accepting input from the industry and public on its proposed delay. Merrill has not filed a comment letter, but feedback from several other firms has been posted to the Labor Department's website. Baird, a regional brokerage with over 857 advisers, requested at least a year-long delay of the regulation.

Merrill's move to modify its position on commission-based accounts may be welcomed by some advisers.

Two planners who left last week cited the inability to offer clients such accounts as a reason they departed for Raymond James. The regional firm has said it would maintain that option under the fiduciary rule's best interest contract exemption.

Some opponents of the rule have criticized it for opening the door to increased litigation. Acting SEC Chairman Michael Piwowar echoed that sentiment last week in highly critical comments of the Labor Department's efforts.

"To me, that rule, it was about one thing and it was about enabling trial lawyers to increase profits," Piwowar says.

Of course, it's unclear what, if anything, could replace the fiduciary rule. While the Trump administration has asked the Labor Department to review the regulation for possible changes, it has not publicly indicated what should come next.

Meanwhile, Merrill Lynch says its fiduciary plans are focused on mitigating conflicts of interest.

The wirehouse has been moving in recent years toward providing what it says is a higher standard of client care. Merrill has become increasingly focused on goals-based planning as well and has recently made changes to increase fee transparency. The firm's investment advisory program now includes $208 billion in IRAs, more than half of Merrill's total IRA assets under management, according to the memo.

The firm will maintain product restrictions in brokerage IRAs, including the purchase of mutual funds. At the same time, Merrill is also looking to add investments such as annuities to its investment advisory program.

In his memo, Sieg said that even if the Labor Department's rule is delayed, "we will continue our efforts to deliver the core elements of a fiduciary relationship."

"These efforts are entirely consistent with our direction as a firm over the past seven years and our long heritage of putting our clients' interests first," he added.

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Fiduciary Rule Regulatory actions and programs Compliance Wirehouses Andy Sieg Merrill Lynch DoL