Merrill Lynch unveiled its strategy to comply with the SEC’s Regulation Best Interest: Cut a small number of funds from its platform and boost disclosures while remaining committed to offering clients brokerage and advisory services.
“Preserving access to brokerage and ensuring that client choice exists as a core principle — that has been very central to the way we have been thinking about it,” says a Merrill Lynch executive who spoke on condition of anonymity.
Compared to the Herculean efforts required by
To align with the SEC’s Reg BI, Merrill Lynch is cutting some — but a relatively modest — number of funds: about 2% of the roughly 2,000 available to brokerage clients, according to executives familiar with the matter who asked not to be named. The funds set to be eliminated tend to fall into niche categories.
Among other changes, Merrill Lynch will cap front-end loads on mutual funds at 3.5%. Prospectuses for some mutual funds on its platform permit higher loads, though clients have not aren’t necessarily been charged a higher fee, executives say.
The company will also provide enhanced disclosures to clients as well as training for financial advisors to prepare them for Reg BI’s June 30 enforcement start date. Given the ongoing coronavirus pandemic, the training will be delivered via video conferencing, online and other means that don’t require in-person meetings.
Few if any of the changes will affect clients enrolled in Merrill’s investment advisory program. More than 80% of the wirehouse’s clients are currently enrolled in the program.
Even as the firm makes these changes, more could be on the horizon.
The Merrill Lynch executives say they are monitoring the situation.
