PrefBlog

In a completely surprising, totally unexpected move, the fiercely independent Bank of Canada is endorsing their boss’ latest move:

The Bank of Canada is endorsing the Trudeau government’s efforts to cool the country’s debt-fuelled housing market.

“Over time, the measures announced by the federal government … will help mitigate risks to the financial system posed by household imbalances,” senior deputy-governor Carolyn Wilkins said in remarks prepared for a speech Thursday in Trois-Rivières.

Even with the economy still struggling to gain traction, the central bank has set a high bar for cutting its key interest rate at its next scheduled rate-setting announcement Oct. 19.

“We are mindful that low interest rates can lead to a buildup in financial vulnerabilities,” Ms. Wilkins pointed out.

She added that the bank is continuing to monitor high household-debt levels and the housing market “very closely.”

The other shoe is dropping on the fiduciary responsibility experiment:

Merrill Lynch will no longer give retirement savers the option of paying a commission for trades, a wholesale exit from the traditional Wall Street sales model in accounts that stand to be affected by new conflict-of-interest rules on retirement accounts.

The Bank of America Corp. brokerage unit told its more than 14,000 brokers on Thursday that after April 10, when the new rules take effect, investors who want a retirement account at Merrill will need to pay a fee based on a percentage of their assets, instead of having the option of being charged for each transaction made in their account.

The announced move, coming six months since the unveiling of the Obama administration’s fiduciary rule requiring brokers to put the interests of retirement savers ahead of their own, is roiling firms across the investing world as they look to comply and even capitalize on the changes.
…
Merrill clients with individual retirement accounts that charge commissions will have to choose whether to roll that over to a fee-based account, which may be more costly for investors who trade little, or move their assets to Bank of America’s online brokerage, Merrill Edge, according to representatives at the firm. The latter option would offer investors access to a self-directed brokerage account or a generally cheaper fee-based option, as well as a soon-to-launch roboadvisory product, known as Merrill Edge Guided Investing.
…
Morningstar said fee-based accounts can yield as much as 60% more revenue than those that charge commissions.

Brokers say the fees are justified because they have to provide a higher level of service by spending more time understanding a client’s full financial situation.

As far as that last claim is concerned, I will wait to see whether the average assets per broker drops as expected! It is regrettable that the story makes no mention about what happens with solicitation fees and new issue commissions; it is even more regrettable that those puffing themselves up as Portfolio Managers are not required to post their composite performance numbers.

This entry was posted on Friday, October 7th, 2016 at 1:24 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.