As the U.S. Department of Labor gears up to implement a new fiduciary rule for retirement accounts, one that creates higher standards for investment products with commissions, one firm, Commonwealth Financial Network, is getting ready.
Commonwealth, a privately held independent broker-dealer and RIA, has decided to stop offering commission-based retirement account products, the firm announced Monday.
The new policy will go into effect April 10, the same day the new DOL regulations become effective.
Although Commonwealth says it likes to offer its advisors as much flexibility as possible, “nevertheless, we feel strongly that our decision to cease offering commission-based products in retirement accounts positions Commonwealth and our network of advisors, as well as investors, advantageously for the future,” the company said in a statement.
The DOL regulation requires advisors handling retirement accounts to act as fiduciaries, putting the best interests of the clients first, which means a higher standard than just the offer of suitable products. Advice offered on a fee basis usually is seen as meeting that higher standard over charging commissions for specific products.
Because Commonwealth is a large player in the financial field, the move might put pressure on other broker-dealers and RIAs to follow suit. However, Wayne Bloom, CEO, says that did not enter the company’s thinking.
“We are just focused on helping our advisors carry out the new DOL rule,” he says. The decision was made to go exclusively fee-based for retirement accounts, “because you can’t go halfway. Most of Commonwealth’s business is fee-based anyway. We have lowered our account minimum for retirement accounts to $1,000 in conjunction with this.
“The DOL fiduciary rule is a good thing for investors. It will disclose or eliminate any conflicts of interest,” he adds.
Less than 10 percent of the company’s revenues are derived from commissions on retirement accounts.
Clients still have time to make 2016 tax-year contributions on either a commission or a fee basis.