Merrill Lynch to offer clients greater transparency on fees
(Bloomberg) -- Merrill Lynch, which has said it will stop offering commission-based retirement accounts as it prepares for new regulations, also plans to more clearly disclose fees that clients pay to the firm’s 14,000 financial advisers.
Merrill will break out fees for asset management services and products including mutual funds, alternative investments and commodities when it mails January account statements later this week. Such fees previously were embedded in statements in ways that clients found hard to understand.
Clients are likely to be more satisfied with “better fee transparency,” Susan McCabe, a company spokeswoman, said in a statement. “The enhancements are being made based on what our clients are telling us they’d like to see.”
Brokerages, under pressure to justify costs as cheaper digital competitors make inroads, are moving ahead with client-friendly changes despite uncertainty over whether planned federal rules for best practices will be implemented. The Department of Labor’s fiduciary rule, which requires advisers handling retirement accounts to charge reasonable fees and commit to giving advice in a client’s best interest, may be delayed, revised or scuttled under the Trump administration.
Morgan Stanley told advisers last week it’s still enacting many of the pricing and product changes it planned last year, such as lowering stock commissions and reducing potential conflicts of interest with outside managers. The Labor Department regulation is scheduled to take effect April 10.
"There are ways to potentially be cute with it. You could potentially cut out retirement business from the back-end bonuses," says an ex-Merrill Lynch executive who works in the independent space. "Cute doesn't usually work when it comes to regulators."
The early decision stops advisers from earning commissions on products that will also generate fees through the firm's Investment Advisory Program.
"We fully expect to offer a range of options to help our clients," CEO Paul Reilly said.
The decision is effective immediately and was made within hours of the Department of Labor issuing new regulatory guidance on the fiduciary rule's implications.
The wirehouse, which is embracing the new regulation, is the first to unveil its strategy in depth.
The new disclosures are among the first public changes enacted under Andy Sieg, 49, who succeeded John Thiel as head of the Merrill Lynch at the start of the year.
The firm has been working toward a higher standard of care for clients over the past several years, Sieg said in a statement. Last year, the bank said it would no longer offer retirement accounts paid for with trade commissions because of Labor Department regulations. Instead, it’s favoring accounts that charge fees based on a percentage of assets.
“We are focused on what our clients want from us in regard to their retirement accounts: that is to act in their best interest and minimize conflicts,” Sieg said.