Inside Insight on Fiduciary Reform at Merrill Lynch and Beyond

Two executives focused on institutional retirement business at Merrill Lynch sit down for a fiduciary chat, offering inside views of one major advisory firm’s approach to navigating regulatory uncertainty. 

News broke in just the last week that the Department of Labor (DOL) has submitted for review by the Office of Management and Budget a new regulation to provide for a second delay in full enforcement of the Obama-era fiduciary rule expansion and accompanying exemptions.  

Until the final rule’s pending publication in the Federal Register, the exact details and length of the second enforcement delay will remain unclear, but industry reports are widely discussing an additional 18-month delay. The extension is clearly crafted to give the Trump administration more time to consider what it will ultimately do with the signature rulemaking implemented late in the final term of his predecessor. In particular, this additional year-and-a-half of transition would give the DOL and the White House a reasonable amount of time to consider the vast amount of industry commentary submitted in response to President Donald Trump’s preliminary request for information about the current and future impacts of the fiduciary reforms.

With that news playing out in the background, John Quinn, who leads the institutional product development and platform management group at Bank of America Merrill Lynch, and Steve Ulian, leader of institutional retirement benefit plan sales and relationship management, sat down with PLANADVISER to discuss their firm’s broad approach to fiduciary reform. On the retirement side of the business, they suggest the firm is focused on promoting its Fiduciary Advisor Services program, which launched in June and allows a Merrill Lynch adviser working with institutional retirement plan clients to take on the role of a true 3(21) fiduciary.

“Plan sponsors tell us clearly they are looking for a real co-fiduciary partner who can give them specific, direct help in determining what their lineup should be,” Ulian explains. “But they want more than this as well. They want help crafting the investing policy statement, with tweaking and maximizing their plan design. They also want the ongoing investment monitoring and real recommendations for how to manage the plan over time.”

Quinn is quick to point out that this fiduciary-focused approach for institutional retirement business is not going away, regardless of what might happen at the DOL or even with the Securities and Exchange Commission (SEC) under president Trump.

“It very well may come to pass that we see a lengthy delay or full repeal of the fiduciary rule in its current form,” he explains. “But I can tell you right now we are fully committed to the product strategy we have put in place, which puts fiduciary services at the center of our offering. The chatter and some of the debate that is still happening on this front, it is not impacting our product strategy. We have made our decision based on what it is that we know plan sponsors are looking for today and in the future.”

Anecdotally, some retirement-focused Merrill Lynch advisers have told PLANADVISER that they have been waiting a long time for this type of change in the home office strategy. One suggested he finally feels liberated to take on more plan sponsor business as a “full-fledged fiduciary,” which he anticipates will be a strong boon for his specific book of business.

The Merrill Lynch adviser said he sees colleagues in the firm—those who have worked more in the role of a product provider or broker rather than with the identity of a plan design consultant or an adviser to individual plan participants—who “naturally are not thrilled” with the fiduciary evolution. His frank assessment was that some are having difficulty transitioning away from the commission-based business they have traditionally relied on. But as noted by both the adviser in the field and by Merrill leadership, “the fiduciary ship has sailed,” and the focus for new institutional business must shift away from commissions-based brokerage services.

Ulian and Quinn joke that the fiduciary advisory program isn’t exactly rocket science. “It’s based on the elements that you would expect,” Ulian says. “Clients receive direct support on recordkeeping and administration tasks, direct support with crafting and monitoring the investment menu, and their plan participants gain access to helpful retirement and broad-based financial education.”