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Capital One to Bar Commissions on Retirement Accounts

By Thomas Coyle November 16, 2016

Capital One Investing will eliminate commissions on advised IRAs to conform with the Department of Labor’s fiduciary rule for tax-advantaged retirement accounts, which is scheduled to take effect on April 10, 2017.

Capital One Investing is the online- and retail-brokerage arm of Capital One Financial, a holding company based in Tysons Corner, Va., whose credit card unit is famous for its “What’s in your wallet?” television spots.

“It’s a no-brainer,” Jeff Sills, advice and planning chief at Capital One Investing, tells FA-IQ. “We really want to do what’s in the customer’s best interest” — and the decision to ban trade commissions and allow only fees on assets under management in retirement accounts, he adds, is proof of that commitment.

Jeff Sills

“We’re pretty comfortable with what the DOL is trying to do,” says Sills. In fact, he says the DOL’s decision to make all retirement advisors client-first fiduciaries, whether or not they’re based in traditionally-fiduciary RIAs, “validated where we were going before it came out.”

Yvette Butler, president of Capital One Investing, agrees “embracing commission-free retirement accounts was a natural decision for us.”

Asserting that a lack of transparency around pricing keeps many would-be small investors out of the market, “we’re hopeful this level-fee pricing model will empower our customers to be more confident investors,” Butler adds in a press release.

In barring commissions on retirement accounts, Capital One Investing follows similar decisions by Merrill Lynch and Commonwealth Financial Network. Meanwhile, other firms — including Morgan Stanley, Edward Jones and Stifel Financial — plan to use a loophole in the rule that allows for commission-based exceptions based on investor consent.

News of Capital One Investing’s stance on the DOL's fiduciary rule comes in a period of flux.

The DOL’s retirement accounts initiative is a creature of President Barack Obama’s White House. There is speculation afoot that President-elect Donald Trump, who seems hostile to marketplace regulation, will scrap it.

If the rule does go away, Capital One Investing will stick to its guns, according to Sills.

“We started on this journey to build a customer-centric, transparent and unbiased investing experience well before the Fiduciary Rule was unveiled, and we plan to continue on this path, which includes eliminating commission” retirement accounts “regardless of potential changes to the rule,” he says.

In contrast, Commonwealth has hinted it might go back on its decision to bar retirement account commissions if the rule gets repealed.

Capital One Financial’s financial-advice and -planning business is only a year old, operating out of several regional offices and a call center in Wilmington, Del. The unit manages about $26 billion, but declines to say how many advisors it employs.

That said, it’s pleased to talk about its success pulling FAs over from established retail outfits such as Merrill, Morgan Stanley, Transamerica and Vanguard.

Capital One Investing says it added 10 advisors from prominent local, regional and national firms in recent months. More than half of them were hired for the firm’s call-center group, which opened for business in June.

Most of these hires were junior team members at their old firms, according to Sills: “They’re very comfortable with us because of our big name in the marketplace and business model that puts advisors on the same side of the table as investors.”

To support its plan to increase advisor headcount by 30% to 40% in 2017, Sills says Capital One Investing plans to “bring in accomplished CFPs” — that is, Certified Financial Planners, an industry certification — “as well as newer folks” from established firms “who aren’t tainted by transactional thinking.”