Merrill Weighs Fewer Retirement Account Restrictions
(Updates with additional information throughout.)
Merrill Lynch Wealth Management head Andy Sieg told the firm’s almost 15,000 brokers on Friday that he may loosen the strict ban on commission-based retirement accounts that the firm imposed 18 months ago.
Given the essential death of the Department of Labor’s fiduciary rule, Merrill has implemented a review that is aimed at simplifying retirement account procedures and structures while keeping its core emphasis on offering fee-based rather than commission-based accounts, company officials said.
“Now that the regulatory environment has shifted, we’re taking a look at our policies, especially as they might affect policies and procedures for Individual Retirement Accounts, to ensure we keep our clients’ best interest front and center,” Merrill spokesman Matthew Card said in a statement. “Our core strategy, consistent with our principles, remains unchanged.”
The Trump administration let pass a deadline this week for appealing a federal court decision that will overturn the DOL’s fiduciary rule, which required advisors to be held to a higher customer-care standard for retirement accounts.
Merrill, which is owned by Bank of America, moved quickly and more conservatively than most rivals after the fiduciary rule was approved by the Obama administration in October 2016. It prohibited brokers from opening commission-based retirement accounts that could expose firms to litigation for violating the rule if they violated the complex restrictions of its best-interest contract exemption (BICE). Merrill also required brokers to close existing commission IRAs by shifting them to fee-based advisory programs or to Bank of America’s largely self-directed Merrill Edge discount brokerage unit, or by allowing them to migrate to other firms.
Pressured by the departure of some large teams who appeared to find the policy a last straw, Merrill last year made a few modifications to the program. It allows “limited-purpose” commission retirement accounts that hold money-market funds, brokered certificates of deposit and cash. As recently as March, however, Sieg restated Merrill’s overall commitment to the commission account ban, citing its leadership in acting “in our clients’ best interest.”
On Friday’s call with brokers, Sieg reiterated that the 60-day review will not affect the core strategy. The firm hopes to simplify the “architecture” of the account platform so that brokers and customers can better understand their choices and navigate through them more easily, said brokers who listened to an internal webcast. Sieg told them that there will be “flexibility for IRA clients” and a probable restoration of “limited advised brokerage in selected asset classes when it’s in the client’s best interest.”
He did not provide many specifics of the changes under review, and repeated that Merrill will continue to maintain a high standard of customer care, while offering customer choice, in light of the best-interest standard that the Securities and Exchange Commission recently proposed.
Sieg told brokers that he expects some rival firms to go beyond what Merrill may do by rolling back policies to where they were prior to the formal implementation of the DOL Rule in June 2017. But he repeated that Merrill wants to maintain its position as a customer-care leader in a world where regulatory expectations are rising, according to some brokers.
JPMorgan Chase told its brokers and private bankers last month that it is planning to rescind some retirement-account restrictions in light of the apparent demise of the DOL fiduciary rule, but did not spell out specifics.
One restriction on retirement accounts that will not change at Merrill or industrywide is the recently imposed bans on discounts and production credits for so-called Family IRA accounts of brokers and close family members, they said. Merrill has slightly modified the changes that took effect in January, but will not include further review in the current study because the Family IRA rules were made to comply with regulations unrelated to the DOL Fiduciary rules.