Merrill Lynch to End Commission-Based Options for Retirement Savers

Retirement savers who work with Merrill Lynch will no longer be able to pay their broker a commission, the latest example of how new rules on retirement accounts are roiling the wealth-management industry.

The Bank of America Corp. brokerage unit told its more than 14,000 brokers on Thursday that after April 10 investors who want a retirement account at Merrill will need to pay a fee based on a percentage of their assets, instead of having the option of being charged for each transaction made in their account.

Merrill is making the change to comply with the Obama administration's so-called fiduciary rule requiring brokers to put the interests of retirement savers ahead of their own. The rule is expected to affect less than 10% of Merrill's $2 trillion in client assets, Bank of America Chief Financial Officer Paul Donofrio told analysts in April.

"We believe these decisions best position us to meet the responsibilities required by the fiduciary rule," a Merrill spokeswoman said.

Merrill investors in nonretirement accounts won't be affected by the changes.

Merrill is the first brokerage to take the step of eliminating a commission-based account option for retirement investors who want to work with a broker. St. Louis-based brokerage Edward Jones and independent broker-dealer LPL Financial Holdings Inc. are the only other major brokerages to detail their postretirement rule business plans, with both still offering some sort of commission-based option to retirement savers.

Merrill's approach to compliance could serve as a template for its biggest rivals, such as Morgan Stanley and Wells Fargo & Co.'s brokerage arm, according to Alois Pirker, a research director at Boston consulting firm Aite Group. That is because those firms, including Merrill, have more high-net-worth clients who may already work with a broker through a fee-based account.

"This requires that clients engage with the firm fully," Mr. Pirker said. "If the client isn't willing to do that, they will need to look for different options."

The rule is expected to affect about $3 trillion of client assets in the U.S., according to researcher Morningstar Inc.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

October 06, 2016 17:15 ET (21:15 GMT)

LPL Financial (NASDAQ:LPLA)
Historical Stock Chart
From Mar 2024 to Apr 2024