qualified plans

By Mack Bekeza

Morgan Stanley recently announced how it plans to comply with the impending Fiduciary Rule. As expected, Morgan Stanley did not follow the Merrill Lynch path. Instead, it plans to operate under a provision of the rule called “Best-Interest-Contract Exemption (“BICE”)”. In other words, Morgan Stanley’s strategy is to tackle the compliance requirements and have its clients sign additional disclosures.

Morgan Stanley has decided to take the BICE route because it believes that its “advisers can most effectively uphold a fiduciary standard of care and work in clients’ bests interests by continuing to offer choice.” Morgan Stanley further stated, “Delivering a retirement account platform based on fiduciary principles that provides the widest possible capabilities and preserves client choice is our vote of confidence in our advisers’ continuing commitment to placing client interests first.”

Essentially, Morgan Stanley believes that offering clients the choice between having a commission-based or fee-based retirement account is in the client’s best interest. This also assumes that Morgan Stanley advisers will not sell or recommend certain alternative investments that might not optimally meet a client’s liquidity and retirement needs.

In our opinion, Morgan Stanley may have chosen its business model to differentiate itself from Merrill Lynch. Many advisers only sell commission-based products and want to work for a large broker dealer. The rule points out that paying commissions may be in a client’s best interest (versus asset-based fees) if they have few transactions. However, the firm might still come under fire if its clients believe they are being misled. At the end of the day, it’s about putting the clients first.

If you would like to read further into the decision, check out Investment News’s post about Morgan Stanley’s decision.

©2016 Castle Rock Investment Company. All rights reserved. Please share your insights and comments with us at Mack@Castlerockinvesting.com