Merrill ends mutual fund sales in brokerage retirement accounts

[mickeyd]

Looks like brokerage houses are adapting to new fiduciary rules in dramatic fashion.

Merrill Lynch told its advisers to stop selling mutual funds in retirement brokerage accounts such as IRAs, a move that attempts to spare the wirehouse from potential conflicts of interest ahead of the Department of Labor's fiduciary rule.
A memo sent Tuesday to the firm's roughly 14,500 advisers alerted them to the change. Mutual funds will still be available through Merrill Lynch Investment Advisory Program accounts and non-retirement brokerage accounts, Frank McDonnell, the firm's head of global mutual funds, said in the memo.

Merrill ends mutual fund sales in brokerage retirement accounts, citing fiduciary rule | Financial Planning

 

[NW-Bound]

If not MFs, then what do they sell? Annuities? Penny stocks?

 

[LOL!]

I personally think that ML is trying to get clients to write their congressional reps in order to get the rules changed. They have taken a ploy from the playbooks of health insurance companies: Simply refuse to do business until the rules are changed.

Other brokerages don't seem to have the problem that ML has, but if ML shows some success, those other brokerages will get on that bandwagon.

ML could do lots of things such as sell variable annuities which are not mutual funds, stocks, and ETFs.

 

[RobbieB]

Mine is all common stock.

 

[MRG]

I personally think that ML is trying to get clients to write their congressional reps in order to get the rules changed. They have taken a ploy from the playbooks of health insurance companies: Simply refuse to do business until the rules are changed.

Other brokerages don't seem to have the problem that ML has, but if ML shows some success, those other brokerages will get on that bandwagon.

ML could do lots of things such as sell variable annuities which are not mutual funds, stocks, and ETFs.

I would agree. I thought Edward D. Jones had already announced the same thing.

Sad, I expected it to get better, not more difficult.

 

[foxfirev5]

Don't need them so there's no feeling of loss here. DM worked for ML the last couple months of a 50 year career. She could not tolerate the low life churn and earn culture. Lucky for me I caught on early

 

[samclem]

Sad, I expected it to get better, not more difficult.

But I was not optimistic that these outfits would offer good, customer-first advice anyway. It was just too much of a culture change to be accommodated. Somebody else will fill the market vacuum, maybe it will be low-cost robo-advisers or a company that only sells advice and doesn't even sell the instruments themselves. Most customers would be far better served with that than with the former model of advisor compensation.

 

[RobbieB]

I think it makes sense. Why would you want to employ a paid advisor to buy mutual funds for your account? So you can pay twice?

I employ an advisor to select and balance my bag with common stocks to follow my financial plans. He does a good job. No mutual funds are involved.

I have 2 other brokers doing my bonds and they don't get paid. Bonds are kinda boring and don't need much attention.

 

[meierlde]

If not MFs, then what do they sell? Annuities? Penny stocks?

Note that this applies in the advisor channel where the advisor selects the funds for the client, to avoid conflicts of interest. Other self managed channels still exist to buy Mutual funds "According to Merrill, clients looking for alternatives to commission-based funds in their IRAs can turn to the firm’s Investment Advisory Program (IAP), Merrill Edge Select Portfolios, the Merrill Edge self-directed channel and Merrill Edge Guided Investing (beginning in January). “Each of these offerings will be augmented on an ongoing basis to ensure choice for our clients,” it said."
So it is essentially saying that 12-b1 programs create conflicts of interest.

 

[MRG]

But I was not optimistic that these outfits would offer good, customer-first advice anyway. It was just too much of a culture change to be accommodated.


Somebody else will fill the market vacuum, maybe it will be low-cost robo-advisers or a company that only sells advice and doesn't even sell the instruments themselves. Most customers would be far better served with that than with the former model of advisor compensation.

I see that point. No way a pond scum learns to walk overnight. Honestly there's no way to flip a business model over as I had hoped might happen.

Nature abhors a vacuum so if there is a need.... I'd love to see alternatives like robo gaining more acceptance. I don't know how folks get education on where to go.

 

[RobbieB]

Pond scum?

 

[MRG]

Pond scum?

https://goo.gl/images/8CA0TY

Pond scum.

Probably stated too strongly, sorry.

Some advisors in the business are very expensive for little return. There are others who provide a valuable service to their clients.

Unfortunately many of my professional encounters were with the former, hence my preconceived notions.

 

[RobbieB]

OK.

My guy keeps me in caviar, truffles and lobster tails.

But he's an old grey haired guy like me. Not one of those young "all fired up whippersnappers" out to make a name for themselves.

 

[LOL!]

Maybe this is also a way to keep clients in high-fee mutual funds that they already own. The linked article was all about selling mutual funds and not about buying mutual funds. Aren't I terribly cynical?

 

[gcgang]

Trends in brokerage industry have been towards fee based accounts and away from commission based products for a long time. Many brokers, especially those who are CFPs, welcome the elimination of conflict of interest inherent in commission based business. The good ones have tried to offer value added "holistic" advice whether they are paid by commissions or fees.

Signing a document saying you understand you are paying, say 1%, for advice and investing in low fee funds or just getting charged the same 1% in the form of higher annual (12b?) mutual fund charges seems mostly cosmetic to me. But I'd be in favor of the regulation as it makes everything more transparent, as there are probably lots of clients in C shares that don't realize they're paying higher fees.

Merrill now offers a program like Robbie mentioned, where you pay the advisory fee, and invest directly in portfolios of stocks/bonds, eliminating the mutual fund/ETF fees.

But if the broker has been doing C share type business in retirement accounts, it's a pain in the a** to convert clients to advisory model to continue to get paid.

 

[donheff]

Note that this applies in the advisor channel where the advisor selects the funds for the client, to avoid conflicts of interest. Other self managed channels still exist to buy Mutual funds "According to Merrill, clients looking for alternatives to commission-based funds in their IRAs can turn to the firm’s Investment Advisory Program (IAP), Merrill Edge Select Portfolios, the Merrill Edge self-directed channel and Merrill Edge Guided Investing (beginning in January). “Each of these offerings will be augmented on an ongoing basis to ensure choice for our clients,” it said."
So it is essentially saying that 12-b1 programs create conflicts of interest.

This sounds like no big deal. I was wondering what they would do for corporate 501K accounts and the like. Sounds like they will leave things pretty much as they were for everyone except the 1%ers.

 

[mystang52]

Sorry for this partial thread drift but I can't resist. Based on one experience, I hate Merrill Lynch. My toddler son, was injured and we got a modest settlement. I bought a zero bond maturing at his high school graduation. Simple - give them the money, and at graduation get the matured proceeds.
Some 5 years afterwards, Merrill sent me a letter advising they were [unilaterally] changing the terms of the agreement and charging me $50 annual fee. Every year I had to call to get that illegal fee "waived." Then, a new rep took over my account. He was a young and arrogant p*&^k, and made sarcastic remarks about my whining about the fee.
I complained and at first the complaint went nowhere. I ultimately got a new rep, but still had to call every year to get the fee waived. Oh, yeah, they did offer other products which would not have an annual fee, BUT there would be a fee to process the change! And, none of those products were as good as the return on the zero bond.