Merrill Lynch Reverses Broker Fiduciary Rule Policy

By | September 5, 2018

Bank of America Corp.’s wealth management arm Merrill Lynch is reintroducing brokerage capabilities to its retirement accounts, reversing a policy put in place to comply with Obama-era regulation.

In response to requests from customers, the company expects to add a brokerage option back to individual retirement accounts by Oct. 1.

Merrill Lynch, along with JPMorgan Chase & Co., effectively banned brokerage retirement accounts last June and began moving clients into advisory accounts to prepare for the U.S. Department of Labor’s fiduciary rule.

However, the rule which meant to curb conflicts of interests for financial advisers was overturned in March by the 5th U.S. Circuit Court of Appeals. At that time, Merrill executives said the firm would keep the policy in place to serve the best interests of its clients.

Now, in response to client feedback, the firm has decided to reverse the policy.

Since the court’s decision, advisers and executives at the wirehouse have received inquiries about the policy from investors. Clients were wondering why their accounts were more restricted at Merrill Lynch than at other firms, a senior Merrill Lynch official said.

When the policy was implemented Merrill Lynch, which manages $2.3 trillion of client’s assets, had roughly $150 billion of individual retirement accounts in brokerage format. Since the implementation about a third of those assets have moved to adviser accounts, the official said, adding that the firm does not expect many of those clients to switch back to the brokerage model once the option is available.

Shortly after the Department of Labor’s rule was overturned, the U.S. Securities and Exchange Commision proposed a replacement rule that would require brokers to act in the best interest of clients when making investment recommendations for all types of accounts.

Merrill Lynch has taken an expanded view of its investment account practices instead of just focusing on retirement accounts to align with the direction the SEC is headed, the official said.

Merrill Lynch also plans to become more transparent in anticipation of the proposed rule by expanding delivery of summaries that outline services and associated fees to all brokerage clients including non-retirement accounts.

(Reporting by Imani Moise; Editing by Meredith Mazzilli)

Topics USA Agencies

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