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What Merrill and Morgan Stanley's Different 401(k) Tacks Might Mean

March 28, 2017

Merrill Lynch and Morgan Stanley are leading the brokerage industry in revamping how their advisors service 401(k) plans, although their approaches differ significantly, InvestmentNews writes. But they may not be addressing the core problems faced by brokers servicing 401(k)s, some experts tell the publication.

Earlier this month the two wirehouses unveiled strategies to help their brokers servicing 401(k) plans comply with the Department of Labor’s Conflict of Interest rule, which aims to hold retirement brokers to the more stringent fiduciary standard and was scheduled to go into effect April 10. Under the rule, which the DOL has already proposed to delay by 60 days, many of the interactions now treated as non-fiduciary would be labeled fiduciary, InvestmentNews writes. Merrill’s approach is to offer advisors servicing 401(k) plans more discretion, while Morgan Stanley is taking away their advisors’ discretion, Fred Barstein, founder and CEO of The Retirement Advisor University, tells the publication.

Morgan Stanley, which unveiled its initiative first, opted to assume the fiduciary responsibility with a product dubbed ClearFit, aimed at retirement plans with less than $10 million. Alternatively, the firm is also working with third-party 401(k) providers for the small-plan space to act as fiduciaries, but a spokeswoman declined to tell InvestmentNews about any specific providers.

Merrill Lynch followed with its own strategy a few days after Morgan Stanley. Merrill opted to expand the number of advisors who can get designated as retirement plan specialists. Merrill and Morgan Stanley each currently have about 300 designated specialists who can act in a fiduciary capacity, InvestmentNews writes.


Both firms, however, are also trying to push generalist advisors to partner with specialists, according to the publication. And that may put retirement plans into the hands of inexperienced advisors, even though the strategy may achieve fiduciary compliance, Chad Larsen, president and chief executive of the RIA MRP, tells InvestmentNews.

What’s more, it may be difficult to convince specialists to work with generalists, in part because of reputational risk and in part because of concerns over splitting fees, Kevin Mahoney, senior institutional consultant at The Mahoney Group of Raymond James, tells the publication.

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