(New York)

Merrill Lynch has so far been the poster child for fiduciary endorsement. It was the leader in doing away with commissions and restructuring its offerings in a way that complied with the fiduciary rule. However, that stance has been slowly receding and now Merrill has announced new commission-based retirement accounts that will be available next month. Merrill Lynch reportedly got negative feedback on a fee-only model from both clients and advisors, which encouraged them to change their position.


FINSUM: This is good news for clients and brokers. Clients will still have some lower-priced options, something the fiduciary rule seems like it may undermine.

Source: Wall Street Journal

Published in Wealth Management

(New York)

Barron’s has just published the results of a survey which shows that more than 9 out of 10 investors want the fiduciary rule. The study was done by Financial Engines, and was comprised of individual investors. 93% of Americans said they wanted a best interest rule, a big jump from last year’s survey, which saw only 73% wanting a rule. However, more than half of all respondents mistakenly thought such a rule was already in place. Other stats cited in the study show that investors are becoming more attuned to the issue of fiduciary status.


FINSUM: The thing this article does not mention is how many of the respondents realized the new rule being put in place would raise average costs to investors?

Source: Barron’s

Published in Wealth Management

(New York)

The fate of the fiduciary rule is unclear, but some things are not: that big firms are making loads of money on conflict-free advice. For instance, Bank of America Merrill Lynch saw a big jump of $29.2 bn in fee-based client assets in the first quarter. JP Morgan saw $8 bn of inflows, including those with a recurring fee. The piece argues firms had already begun the switch well-before the rule was released, and that the new rule just helped them cement the changes. Fee-based accounts are great for firms as they can get as much as 50% more revenue out of an account than with a commission-based model, says Morningstar. Merrill Lynch is already seeing gains from its fee-based model, with revenue up 3% in the first quarter.


FINSUM: This article highlights the inherent flaw of the fiduciary rule and the measure is not even finalized yet. What good is a conflict-preventing rule if it ends up raising costs for so many retirees?

Source: Wall Street Journal

Published in Wealth Management
Friday, 07 April 2017 00:00

Pay to Stay Put No Matter the DOL Rule

(New York)

No matter what ultimately happens with the DOL rule, big brokers are going to keep pay steady for their advisors, says this piece. The numbers behind pay, such as variable commission rates for different products, are going to be “levelized”, but on the whole compensation should stay steady, as the big firms don’t want to upset their staff. “Retroactive grid” compensation will be done away with, in favor of “incremental pay grid”, which pays for new Dollars coming in. The old staple of salary and commission may disappear in favor of salary and bonus, putting advisors more in line with other staff at banks. Advisors don’t like this pay structure, however, so firms are nervous about executing it.


FINSUM: Big changes are afoot. This piece tries to project the idea that pay will broadly stay the same, but we are not buying it.

Source: Bank Investment Consultant

Published in Wealth Management
Thursday, 06 April 2017 00:00

Morgan Stanley Ignores Fiduciary Delay

(New York)

With the fiduciary rule now officially delayed by the DOL for 60-days, most of the wealth management world thinks it won’t survive its review process. However, despite these expectations, Morgan Stanley is pressing ahead with a suite of pro-fiduciary changes that it had planned to comply with the DOL’s rule. Starting in May, the broker with change its commission structures for stocks, ETFs, annuities, and unit investment trusts and it will also reduce the number of mutual funds it offers. “These are important actions that align us even more closely to what our clients expect of us”, said the heads of Morgan Stanley Wealth Management.


FINSUM: The delay came so late in the process that many firms seem like they simply want to stick to their plans.

Source: Wall Street Journal

Published in Wealth Management
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