Welcome to Financial Advisor IQ

JPMorgan on Track to Ban Commission-Based IRAs

March 14, 2017

JPMorgan has notified clients in commission-based retirement accounts that they’ll be moved into its self-directed platform ahead of the scheduled implementation of the Department of Labor’s fiduciary rule, the Wall Street Journal reports.

Clients can still opt for another option but will be moved to the self-directed platform if they don’t respond ahead of the rule’s April 7 tentative implementation date, according to a letter JPMorgan sent out to its clients and seen by the Journal. But the bank also said in its letter “it may not proceed with this transition” if the rule, which purports to require retirement brokers to put clients’ interests first, doesn’t get implemented as originally planned, the paper writes.

JPMorgan announced plans to drop commission-based retirement accounts last fall as part of the bank’s plans to comply with the rule, as did other major brokerages including Merrill Lynch, as reported previously.

At the time, the firm told its retirement account clients at Chase Wealth Management, Private Bank and JPMorgan Securities to switch to a fee-based account or a self-directed platform, but not all clients have made their choice, a JPMorgan spokesman tells the Journal. The move isn’t expected to affect a large portion of clients, as only about 5% of the firm’s assets are in fee-based or commission-based individual retirement accounts, the spokesman tells the paper.

The fate of the rule remains unknown, meanwhile. Earlier this month, the DOL proposed a 60-day delay to the rule following a February memorandum from president Donald Trump, and opened up the proposal to a comment period that ends March 17.

The agency has received hundreds of letters from both supporters and opponents of the rule already, which in part prompted it to issue guidance to advisors concerned about how it plans to handle non-compliance in case the delay of the rule is itself delayed.


JPMorgan isn’t the only large wealth manager to hedge its bets on the rule’s implementation. Last week, Merrill Lynch sent a letter to its advisors reiterating that it plans to go through with its plans to ban commission-based retirement accounts but said that it’s reviewing “limited circumstances” in which switching clients to fee-based accounts may not be in their benefit.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.