Displaying items by tag: commissions

(New York)

Advisors pay attention. For the last two years, many firms, large and small, have been been moving their clients into fee-based accounts. This mostly started as a response to the fiduciary rule, but had the side benefit of driving more revenue for advisors. However, a new lawsuit against Edward Jones says that doing say may violate reverse churning rules. The case could expose all firms that have undertaken the same practice. Consumer Federation of America head Barbara Roper commented that “We have heard persistent reports that this is happening at a number of firms, and I have heard that from sources I consider reliable”.

FINSUM: This is a tough situation for firms. On the one hand you are being subjected to new rules and guidance saying fee-based accounts are better and safer, but because you are moving to such a model (many big brokers almost did away with commission based accounts), you are being subjected to claims of reverse churning. What a mess.

(Washington)

Advisors have been waiting with their fingers crossed in the hopes that the DOL rule might be done away with, and in its place, a new SEC rule installed. Well, it looks like a positive outcome might be on the cards. The SEC and DOL have been working on a joint rule for a few months and now it appears the new more harmonious fiduciary rule will debut this fall. Now the caveat to this news is that these are estimated dates based on various procedural deadlines, such as the DOL’s delay expiring in summer 2019, but experts in the space agree.

FINSUM: We think the SEC and DOL will debut a rule this fall for comment, probably in late fall, and then try to implement everything by July 2019. Stay tuned.

(New York)

Morgan Stanley’s wealth management can be described as nothing other than an unmitigated success in the fourth quarter. The numbers are in, and the data show that the unit is minting cash as the broker enjoys the transition from commission-based to fee-based accounts as provided by the fiduciary rule. Revenue increased a whopping 10% and the profit margin rose from under 10% the previous year to an eye-watering 26% in 2017.

FINSUM: We realize the importance of fiduciary duty, but how is a transition to much more expensive fee-based accounts—which are hugely boosting net profits to big firms—in the ultimate best interest of clients?

(Washington)

On Wall Street has run what we consider to be a very bad article, but we thought our readers might enjoy, or cringe, in hearing about. In an article entitled “Why Financial Planners Should Support a Strong Fiduciary Rule”, the director of consumer protection for the Consumer Federation of America manages to make almost no discernible argument. Attacking those who oppose the fiduciary rule, the article fails to make any salient points in support of the current DOL version of the rule. In fact, the most interesting part of the article is actually an inadvertent support of those who oppose the DOL rule. The author acknowledges that commissions-based payments are no more inherently conflicted than fee-based accounts.

FINSUM: This article was incredibly mind-numbing. While we have been in consistent opposition to the DOL rule, we are not against fiduciary duty in principal, and have been trying to find arguments in its favor. In this piece we kept reading and reading waiting for a good point to be made, but it never arrived.