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DOL Fiduciary News: November 9, 2017

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Clayton: SEC targets 'complex, hidden fees' [and bad broker database]

InvestmentNews; Nov 8, 2017 @ 1:49 pm

Securities and Exchange Commission Chairman Jay Clayton said on Wednesday the agency is targeting complex and hidden fees that can harm investors — both through enforcement and by clarifying disclosure requirements.

In a speech at a Practising Law Institute conference in New York, he also said that the SEC is creating a database of financial advisers who have been barred from the industry.

Mr. Clayton highlighted examples of opaque costs, including when an investor is put in an expensive mutual fund share class rather than a lower-cost one in the same fund; when a financial adviser uses fund assets to pay expenses that their firms should cover; and when brokers secretly mark up securities prices to increase their profits.

"A narrative that flows throughout the commission's inspection and enforcement programs is complex, obscure or hidden fees and expenses that can harm investors," Mr. Clayton said. "I expect that our Enforcement Division will continue to be active in pursuing cases where hidden or inappropriate fees are at issue, but we also are exploring whether more can be done to clarify fee disclosures made to retail investors and, thereby, deter and reduce the opportunities for misbehavior."

...In addition to the SEC cracking down on fraud, investors need to be armed with better information to protect themselves, Mr. Clayton said. 

Merrill Lynch swells ranks of fiduciary 401(k) advisers by more than 3,000

InvestmentNews; Nov 8, 2017 @ 1:54 pm

Merrill Lynch Wealth Management is charging into the fiduciary fray with lightning speed.

Since March, when the wirehouse brokerage announced plans to transition its defined-contribution-plan business to a fiduciary model in response to the Labor Department's fiduciary rule, the number of its financial advisers allowed to service retirement plans as a fiduciary has swelled by more than 3,000.

Prior to this, the firm only had a few hundred advisers certified to work as 401(k) fiduciaries, representing a small sliver of its roughly 15,000 advisers. Now, more than 22% of its adviser force is certified — and executives foresee that portion getting much larger in the coming months.

"I think at this juncture, our goal is to designate every adviser that wants to get designated," Steve Ulian, head of institutional retirement benefit plan sales and relationship management at Bank of America Merrill Lynch, said.

The Department of Labor fiduciary rule has had a profound effect on the way broker-dealers conduct 401(k) business. The Obama-era regulation, which partially went into effect in June, turns several interactions with 401(k) plan sponsors and participants that were previously non-fiduciary in nature into fiduciary advice. 

Financial Planning Coalition Stresses Fiduciary Rule in SEC Letter

Financial Advisor; November 8, 2017

The Financial Planning Coalition says the Securities and Exchange Commission’s proposal to develop standards of conduct for investment advisors and broker-dealers can and should complement the Department of Labor’s fiduciary rule.

In a letter to the SEC—in response to a request for comments on the proposal to develop standards—the coalition said, “The lack of a uniform fiduciary standard exacerbates investor confusion and causes investors harm.

“SEC action to properly apply a fiduciary standard to all personalized investment advice is long overdue. Any SEC rule-making on standards of conduct for broker-dealers providing personalized investment advice to retail investors should not serve as a replacement of the DOL’s 2016 fiduciary rule, but rather a complement to it,” said the coalition.

The coalition is made up of the Financial Planning Association, the Certified Financial Planner Board of Standards and the National Association of Personal Financial Advisors.

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