Morgan Stanley and Merrill Lynch go in opposite directions on fiduciary rule
Morgan Stanley will keep commission-based retirement accounts under the fiduciary rule's best interest contract exemption, setting it apart from rival Merrill Lynch, which will cease offering clients that option.
The Department of Labor's regulation, which goes into effect next April, has divided firms over whether to use the exemption because of concerns about liability risk as well as alienating clients who prefer transactional services.
"We believe our advisers can most effectively uphold a fiduciary standard of care and work in clients' best interests by continuing to offer choice,” Shelley O’Connor and Andy Saperstein, co-heads of wealth management, said in a statement.
Morgan said that the transaction-based accounts it will offer will contain "a broad product suite including mutual funds and exchange-traded products (such as ETFs) amongst other products."
Morgan Stanley has more than 15,000 advisers and over $2 trillion in client assets, making it one of the largest firms to unveil its plans to comply with the fiduciary regulation.
"Optimizing choice for our clients … is critical to how we operate as a firm," CEO James Gorman said during an earnings call where the wirehouse reported net revenue was a record $3.9 billion last quarter.
CEO Wayne Bloom says the threat of lawsuits in the wake of the new regulation prompted the change, which could be a first among IBDs.
After the fiduciary rule was announced, it wasn’t clear how brokerage firms would adapt. Here's why the wirehouse is a standout on its approach to the new regulation, and why one competitor isn't.
The wirehouse, which is embracing the new regulation, is the first to unveil its strategy in depth.
Ameriprise, which has over 9,000 independent and employee advisers, said on Wednesday that it too will use the exemption. However, Ameriprise also said it will remove some products available on its platform, of which there are thousands, in order to better ensure compliance with the new regulations.
Earlier this week, Commonwealth Financial Network followed Merrill's lead in saying that it would drop commission-based retirement accounts. The independent broker-dealer, which has about 1,650 advisers, said the threat of lawsuits was too great.
Merrill's decision may also have partially been a reflection of the different business strategy and offerings available at Bank of America. When the firm announced its fiduciary plan, it noted that the wirehouse's clients had other options available at the bank, such as its forthcoming robo adviser, as well as Merrill Edge.
The wirehouse, which has over 14,000 advisers, also feels that clients increasingly expect conflict-free advice, according to a person familiar with matter.
A number of firms, such as UBS and Raymond James, have yet to announce their plans. But executives privately say that they expect more announcements in the coming weeks.