Research Assessment #8

Date: November 18, 2016

Subject: Department of Labor Ruling Effects on Merrill Lynch and Chase
MLA citation:
"Chase, Regions, SunTrust Untroubled by Fiduciary Rule." Bank Investment
Consultant. N.p., n.d. Web. 18 Nov. 2016.
<http://www.bankinvestmentconsultant.com/news/chase-regions-suntrust-
untroubled-by-fiduciary-rule>.
Iacurci, Greg. "Merrill Lynch Eliminates Commission IRA Business in Response to DOL
Fiduciary Rule." InvestmentNews - The Investing News Source for Financial
Advisers. N.p., n.d. Web. 18 Nov. 2016.
<http://www.investmentnews.com/article/20161006/FREE/161009942/merrill-
lynch-eliminates-commission-ira-business-in-response-to-dol>.
Analysis:
As a follow up to my research on the department of labor ruling, I was
asked to completely understand the effects of the department of labor
fiduciary ruling on the separate financial services companies and their
policies.
To start off, Merrill Lynch is my first main company of research. Merrill
Lynch is a part of Bank of America and provides financial services. In
response to the fiduciary ruling by the Department of Labor, Merrill Lynch
has instated certain policies. The first and major policy is that after this year,
Merrill Lynch will no longer be offering commission based IRAs. This move is
so that the investment of retirement assets from IRAs cannot be commission
based, rather, a fee-based IRA will be created. This is to prevent the
avoidance of the new Fiduciary Rule, stating that investments must be made
in the best interest of the client rather than simply just the advisors belief.
As the advisors will no longer have the ability to invest based on commission
and benefit, the firm is eliminating these options entirely for the safety of all.
Finally, the firm has also decided that any assets that are held in these
legacy accounts will only receive certain recommendations after the
enactment of the fiduciary ruling. These accounts will not receive
recommendations on what to buy or allow the addition of new legacy assets,
and the advisors will only give hold and sell recommendations on the
previously existing accounts. Merrill Lynch is also avoiding a provision of the
rule, the best-interest contract exemption, an exemption that involves
jumping through various compliance hoops.
Next, JP Morgan is another company that has to face changes for its
financial services. JP Morgan also plans to follow a similar plan in order to
comply with the fiduciary rule. Although this company has been a Fiduciary
for the last 175 years, it has had to pay fines at various times throughout the
years because of its noncompliance. Chase will be offering an account to
clients in which they can have a flat fee in order to have the advisors assist
them or simply move to a self-directed account without advice. Brokerage
IRAs will have a minimal impact on JP Morgan Chases overall profits and thus
the transition from having some to none brokerage IRAs will require minimal
change.
 In accordance to both of these major companies, they have to
understand that the law of large numbers states that no matter how great
the advisors, 1 to 2% will be the bad ones. The decision here comes down
to whether to enact policies that stop these bad advisors or remove them.
However, they have seen through research that moving these accounts to
fee-based methods will in fact, remove the risk of these advisors making
incorrect choices as well as increase revenue of the company overall.