In a move that will shake the broker-dealer and retirement plan industries, Merrill Lynch’s decided to end its commission individual retirement account (IRA) business to comply with the Department of Labor’s (DOL) new fiduciary rule.
Merrill Lynch with more than 14,000 advisers, will no longer offer new, advised commission-based individual retirement accounts beginning April 10, 2017 which is the day the Fiduciary Rule goes into effect. After April 10, Merrill will migrate clients to its advisory platform, self-directed brokerage or robo advisory service.
While many broker-dealers will still continue to offer commissioned based IRAs such as LPL, which announced its intention to continue that business and many Merrill brokers may decide to leave if they want to continue a commissioned based business, I believe that other large broker-dealers will follow. This is a bold move and it always takes one person to make a bold move and then others will follow.
Offering a commissioned based IRA can be attractive to the brokers who love the trails, the new fiduciary rule and the best interest exemption contract may make the continued offering of such commission based IRAs as a landmine.
While I believe that smaller broker-dealers may decide to ditch the IRA business because of the fiduciary rule, Merrill’s decision may gave their competitors both large and small competitors to think how they can live in an IRA world without commissions.
