BAC Bank of America Corporation

By Michael Wursthorn 

Billions of dollars in new fee-paying assets flowed into Bank of America Corp.'s coffers during the first quarter, a record high that comes as its Merrill Lynch unit continues its efforts to comply with now-delayed retirement rules.

Nearly $30 billion of new fee-paying assets flowed into the Charlotte, N.C., bank's global wealth unit in the January-March period, as brokers push retirement savers who pay commissions for stocks and bonds toward a choice: move their accounts to a model that charges a fee based on a percentage of assets or to online brokerage platform Merrill Edge.

Higher revenue from asset-based fees helped push Merrill's revenue up 3% from last year to $3.8 billion, offsetting lower traditional commission revenue, the bank said. Of Bank of America's $2.59 trillion in total wealth assets, about $946.8 billion are in longer-term investment strategies, including those that charge a fee.

"These solid results were produced in a period of change for the industry as firms and clients anticipate new fiduciary standards and other market dynamics," finance chief Paul Donofrio said on a conference call Tuesday.

Bank of America has been talking with its commission-paying retirement savers since last fall in an effort to comply with the Labor Department's now-delayed fiduciary rule requiring brokers to put the interests of retirement savers ahead of their own. Even after the Labor Department said earlier this month that it would delay the rule's April 10 implementation by 60 days to conduct a review of its economic impact, Merrill executives told brokers to push forward.

The first-quarter inflows were a record high for the unit, beating the previous mark of $20.4 billion set in the first quarter of 2013. The bank said the inflows were driven by strong client activity and the movement of assets from individual retirement accounts that pay commissions into fee-based accounts.

Meanwhile, online brokerage platform Merrill Edge saw a 21% jump in assets from the year-earlier period to $154 billion, the bank said. Mr. Donofrio credited the increase to more clients who wanted to direct their own investments. The bank launched Merrill Edge in 2010 to attract investors with less $250,000 in assets, and a robo-adviser service was recently added to the platform.

Even before the fiduciary rule, brokerages were pushing clients to fee-based accounts. Brokerage executives say clients better understand how much they pay for investment advice in fee-based accounts and benefit from a higher level of supervision. The move also helps brokerages' bottom lines; researcher Morningstar Inc. says fee-based accounts can yield as much as 50% more revenue than commission accounts.

Wells Fargo & Co., which has kept commissions as a payment option in retirement accounts, last week reported a 14% increase in fee-based assets to $490 billion in the first quarter. The San Francisco bank attributed the gains to rising markets and inflows of client cash and assets. While also reporting first-quarter earnings last week, J.P. Morgan Chase & Co. said $8 billion of new assets flowed into long-term products, including those that charge a recurring fee. Total client assets stood at $1.8 trillion as of March 31, up 10% from the year-earlier period, the New York bank said.

Wells Fargo previously said it would continue to allow its retirement-saving clients to pay commissions for trades, although some investment products wouldn't be available for purchase in such accounts. J.P. Morgan, meanwhile, said retirement savers who currently pay commissions would have to move into accounts that are charged a fee or continue to pay commissions through a self-directed account. Since the rule's delay, J.P. Morgan has pushed back its own timetable to align with the Labor Department's.

Morgan Stanley has also been making the push to work with more investors for a fee. The New York bank reports earnings on Wednesday.

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

(END) Dow Jones Newswires

April 18, 2017 12:14 ET (16:14 GMT)

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