Commonwealth Financial Kills Commissions on IRAs
The Department of Labor’s fiduciary rule, which requires brokers to put clients’ interests first, has caused a second brokerage to stop offering commission-based IRAs, ThinkAdvisor writes.
Commonwealth Financial Network announced plans to stop offering retirement investors commission-based products in their IRAs and qualified plans when the DOL rule goes into effect next April, the publication writes.
The independent broker-dealer, which supports 1,700 advisors, says the decision was driven by the DOL rule.
Commonwealth’s new internal rule comes on the heels of Merrill Lynch making a similar announcement. Earlier this month, the brokerage told its more than 14,000 advisors that as of Apr. 10 next year, retirement investors will only be able to open fee-based accounts, explaining that putting such investors into fee-only accounts will reduce brokers’ potential conflicts of interest in recommending products.
Only 10% of Commonwealth’s revenue comes from retirement accounts that charge commissions, ThinkAdvisor reports.
Similarly, only about 10% of the $2 trillion in client assets at Merrill Lynch are expected to be affected by the rule, Paul Donofrio, chief financial officer at Bank of America, said earlier this year.
Commonwealth will still offer commission-based accounts in non-retirement accounts, it said in a statement, according to ThinkAdvisor.
The publication adds that Commonwealth thinks the commission-based approach is appropriate for many investors, and wants to give its advisors as much freedom as possible in running their practices.