Commonwealth Won’t Offer Commission-Based Products for DC Plan Clients

The announcement impacts both IRAs and qualified plans. 

Commonwealth Financial Network, one of the large-volume independent broker/dealers active in the U.S. qualified retirement plan market, will cease offering commission-based products in all retirement accounts with the 2017 implementation of the Department of Labor (DOL) fiduciary rule.

According to Commonwealth’s executive team, the thought process behind dropping commission-based defined contribution (DC) business moving forward was pretty straightforward—at least economically speaking.

“Commonwealth wholeheartedly supports a fiduciary standard; in fact, the vast majority of our business is already conducted in that manner,” the firm says. “This was a challenging decision culturally, however, as Commonwealth holds strongly to our founding belief of offering advisers both choice and the freedom to craft their businesses in the way that allows them to best serve their clients.”

The decision was likely simplified by the fact that less than 10% of Commonwealth’s revenue is currently derived from commissions on retirement accounts, according to data provided by the firm. And at the same time, Commonwealth is “already home to a robust network of fee-based advisers.” 

As such, the firm “feels strongly that [its] decision to cease offering commission-based products in retirement accounts positions Commonwealth and our network of advisers, as well as investors, advantageously for the future.”

NEXT: More on the decision

The new policy does not become effective until April 10, 2017, “so there is ample opportunity for 2016 tax-year contributions to be made on either a commission or a fee basis,” the firm says.

Interestingly, Commonwealth says it is only dropping commission-based products in the parts of its business policed by the Employee Retirement Income Security Act (ERISA)—offering some food for thought about just how influential the DOL fiduciary rule is proving to be. Many other firms have announced fundamental changes to business processes and client relationships. 

“Although we have taken this step in relation to retirement accounts, we continue to believe that a commission-based approach remains an attractive and appropriate option for many investors—and thus we will continue supporting that option for non-retirement accounts,” the firm explains.

Followers of the retirement planning industry will remember that only a few weeks back, news reports emerged that Merrill Lynch, known as one of the four big wirehouse broker/dealers in the U.S., will no longer sell advised, commission-based individual retirement accounts (IRAs) starting in 2017.

Like the Merrill news, the Commonwealth announcement is perhaps less surprising than it is vindicating for many advisers. Trusted ERISA attorneys and sales executives have been saying for months, if not years, that the new fiduciary rule is sure to drive more level-fee business for financial advisers and their service provider partners, at the expense of commission-based sales. 

A full list of other recent fiduciary rule-related product announcements can be found at