Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer/RIA, said that due to the Department of Labor’s fiduciary rule, it will stop offering commission-based products in retirement accounts next year. The move goes into effect on April 10, 2017, the date the new rule is implemented.
“Commonwealth wholeheartedly supports a fiduciary standard; in fact, the vast majority of our business is already conducted in that manner,” said the firm. “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.”
“Nevertheless, we feel strongly that our 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.”
The fiduciary rule allows advisors to recommend commission-based products under the best interest contract exemption (BICE) if they expressly state that the investment is in the client’s best interest. Opponents of the provision believe that it will leave financial institutions open to expensive class action lawsuits on behalf of disgruntled investors.
Commonwealth will continue to offer commission-based products for non-retirement accounts, noting that these types of products are “an attractive and appropriate option for many investors.” The broker-dealer noted that it derives less than 10 percent of its revenue from commissions on retirement accounts.
Last month, Merrill Lynch, the Bank of America-owned wirehouse with more than 14,000 financial advisors said that it too will also stop offering commission-based IRA’s in April of next year.
Conversely, Ameriprise Financial, Inc. (NYSE: AMP) said on a Wednesday conference call that it will continue to offer commission-based products under BICE when the new regulation takes effect. The firm, which currently has 9,747 advisors, spent $7 million during the third quarter related to the planning and implementation of the Department of Labor’s fiduciary rule.