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Merrill Allows More FAs to Be 401(k) Fiduciaries

March 17, 2017

Merrill Lynch is following in the footsteps of its rival Morgan Stanley in letting more of its brokers act as fiduciaries on defined-contribution plans, InvestmentNews writes.

The wirehouse is expanding the number of advisors it allows to obtain the special designation necessary to service certain retirement plans, according to the publication. To do so, Merrill Lynch will require advisors to service plans with less than $50 million as 3(21) investment co-fiduciaries, meaning the advisor makes investment recommendations but it’s up to the plan sponsor to follow through on it, InvestmentNews writes.

The 3(21) was previously only possible for advisors working with non-platform record-keepers such as Fidelity Investments and typically applied to large- to medium-sized plans, according to the publication. The expanded designation will also apply to Merrill Lynch’s platform of 11 partner record-keepers, normally used for small- to mid-sized plans, InvestmentNews writes.

To get the 3(21) status, advisors will need to get some training as before and have at least four clients or $30 million in defined-contribution assets to be dubbed internally as Retirement Benefit Consultants, according to the publication. Previously, they needed at least $100 million, and the firm has only about 257 such consultants, InvestmentNews writes.

Merrill Lynch is also opening up a separate designation, dubbed Retirement Accredited Financial Advisor, available, after training, to advisors with at least three defined-contribution clients but requiring no asset minimums, according to the publication.

Additionally, Merrill Lynch advisors without the two designations can still partner with designated advisors to service retirement plans — a model that’s been avialable to FAs at some of Merrill’s rivals, including Morgan Stanley and LPL Financial, InvestmentNews writes.

Merrill Lynch’s move comes days after Morgan Stanley unveiled a similar initiative, although the two programs differ. Morgan Stanley will assume fiduciary responsibility in a product called ClearFit, with retirement plan record keeper Ascensus taking on administration and record-keeping. This approach will allow Morgan Stanley’s more than 15,000 brokers to serve as fiduciaries on small 401(k) plans even if they’re non-fiduciary advisors, the company said. The product is also available only to retirement plans with less than $10 million.

But the fate of the Department of Labor fiduciary rule, which purports to force retirement brokers to hold their clients’ interests ahead of their own, is up in the air thanks to a February directive from U.S. President Donald Trump to review the rule. The rule also faces legal challenges from industry groups and vocal opposition from influential GOP lawmakers.

By Alex Padalka
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