Merrill Early Mover Gaffe? DOL Policy Prompts 11 NY-Area Departures
Merrill’s well-publicized decision to prohibit customers from maintaining commission-based retirement accounts once the Department of Labor’s fiduciary rule takes effect continues to reverberate, with potential damages to its bottom line.
A pair of advisers who had been with Merrill for more than a decade in midtown Manhattan left with a more junior broker for Morgan Stanley on Friday, the same day that a 20-year Merrill veteran in Red Bank, N.J. and his junior partner made the journey to the rival firm.
Another broker in Manhattan who spent his entire seven-year career at Merrill also moved to the archival firm on Friday, while a three-person team in lower Manhattan confirmed earlier on Monday that they joined regional firm Janney Montgomery Scott.
While the expensive merry-go-round of job-hopping among big brokerage firms slowed over the past 12 months, the recent pickup of Merrill emigres reflects in part brokers’ concern that Merrill is imposing limitations on individual retirement accounts that will hurt their wallets and/or their customers’ preferences, said brokers and recruiters.
Merrill last October announced it would restrict retail customers to fee-based retirement accounts in congruence with the Department of Labor’s upcoming fiduciary rule. It advertised the decision to the public as one that showed its commitment to customers’ “best interest, not the status quo.” The DOL rule, which is being reconsidered by the Trump administration, permits commission retirement accounts under circumstances that require heightened compliance oversight and allow for customer lawsuits.
“The firm made an early call and made it for business reasons,” said Rob Mooney, a former Merrill Lynch executive who now operates Snowden Lane Partners, an independent advisory firm in New York whose brokers were trained primarily at Merrill. “It’s left a lot of people we see in the recruiting pipeline in unhappy circumstances.”
A Merrill spokeswoman declined to comment.
The Friday shuttle to Morgan Stanley was led by midtown Manhattan broker James Reddington and Matthew Landry who were overseeing around $600 million of customer assets. The pair had been with Merrill since joining from Sanford Bernstein in 2004, according to their BrokerCheck records. Jessica Royston, a junior advisor on the team who joined Merrill in 2008, also made the move.
The team has several clients who prefer commission retitrement accounts and who would have less flexibility in terms of product and discount pricing in the fee-based advisory accounts that Merrill would restrict them to once the new rule takes effect, said a person familiar with the team who was not authorized to speak publicly.
Even if the fiduciary rule is defanged or eliminated by the Trump administration, Merrill has told brokers they should expect it to proceed with some of its policy changes, in part because of its public stand on the integrity of its decision to restrain brokers’ conflicts of interest with clients when choosing commission-based products. Morgan Stanley has promoted what it calls a client-choice philosophy that it says honors both brokers and customers.
The brokers who left in Red Bank, N.J. Don Witkowski and Glen P. Gill, also were concerned about the new retirement account policies, according to a person on their team who spoke on condition of anonymity. Witkowski and Gill, who had been with Merrill since 1996 and 2006, respectively, did not return calls for comment and their assets under management and production could not be determined by AdvisorHub.
The third Manhattan broker who left on Friday for Morgan Stanley was Nick DeMatteis, who until last week spent his entire seven-year brokerage career with Merrill. He was managing around $60 million in assets at Merrill, according to a person familiar with his business.
Earlier last week, two other Merrill vets who together produced around $1.3 million in 2016, joined a downtown Morgan Stanley branch in New York.
To be sure, Merrill continues to have some recruiting victories, On Monday it confirmed AdvisorHub’s reporting that it captured Keith Rowling, an $8 million whiz-kid producer with a $600 million book, from Morgan Stanley.