BofA Unit Reviews Commission-Based Retirement Accounts Ban
Zacks Investment Research | Jun 17, 2018 10:21PM ET
Merrill Lynch, the brokerage unit of Bank of America (NYSE:BAC) , is reviewing its ban on commission on individual retirement accounts (IRAs) that was imposed in 2016. The decision follows the U.S. courts dismissing the Department of Labor’s (“DOL”) retirement savings rule.
The announcement of re-evaluation, expected to be completed within 60 days, was made by Merrill Lynch’s top executive, Andy Sieg to the unit’s more than 14,000 financial advisers. The probable changes include relaxing limitations on stock and bond transactions, and private equity investments in IRAs.
Further, the unit spokesman Matthew Card in a statement said, “Now that the regulatory environment has shifted, we’re taking a look at our policies, especially as they might affect policies and procedures for individual retirement accounts, to ensure we keep our clients’ best interest front and center.”
The DOL’s fiduciary rule was intended to protect retirement savers from conflicted financial advice from brokers seeking commission income. However, it was overturned by the 5th U.S. Circuit Court of Appeals in March 2018.
Notably, Merrill Lynch had decided to ban commission on IRAs shortly after the DOL’s rule was passed. As part of its preparation, the unit launched a limited-purpose, commission-based IRA on its advisory platform for those investors who don’t require ongoing, annual management.
Thus, for retirement clients with traditional brokerage accounts, this meant either moving to BofA’s less-expensive online brokerage service — Merrill Edge — converting to a fee-based accounts or leaving the unit.
With the unit being the lone brokerage firm to do so at that time, the ban resulted in many clients leaving. Now that Merrill Lynch is planning to re-evaluate its strategy, it may result in the return of some of those clients.
Nonetheless, at present, the Securities and Exchange Commission (“SEC”) is in the middle of its own rulemaking process for financial advisors with an aim to keep the best interest of customers in mind while making investment recommendations for any type of accounts. The SEC is currently in the process of collecting public comments on the proposal.
So, BofA is expected to keep this in mind while reviewing its decision on ban on commission-based IRAs.
Shares of BofA have rallied 22.4% in the past year, outperforming the Zacks Investment Research
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