The Bank of America Corp. brokerage unit told its more than 14,000 brokers on Thursday that after April 10, when the new rules take effect, 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.
The announced move, coming six months since the unveiling of the Obama administration’s fiduciary rule requiring brokers to put the interests of retirement savers ahead of their own, is roiling firms across the investing world as they look to comply and even capitalize on the changes. The rule is expected to affect about $3 trillion of client assets in the U.S., according to researcher Morningstar Inc.
At heart is the elimination of incentives that might cause brokers to give conflicted advice. Clients in fee-based accounts are charged a level fee based on a percentage of their assets, minimizing potential conflicts tied to specific investment products, observers said.
A lot of the predictions I had made about the industry’s direction in my 2012 book, Backstage Wall Street, are now coming to pass. This is the first announcement of hundreds we will see as the brokerage industry throws in the towel on conflicted retail business and wholly embraces the Fiduciary rule – not just in letter, but in spirit.
This is not a matter of preference anymore, it is a matter of survival. RIAs have now taken more than a quarter of the wealth management business by market share. The consumers, and forward-thinking advisors, have already voted with their feet and with their assets. The DOL rule is just an accelerant on an already burning bonfire.