Merrill Can’t Restore the Bad Old Days of Conflicts

The fiduciary rule is dead, but its spirit lives on.

The rule, which the Department of Labor first proposed in 2015, required brokers to act as fiduciaries — to put their clients’ interests ahead of their own — when handling retirement accounts. It sounded simple, but it meant that brokers would have to rethink the way they do business.

Mutual fund companies routinely pay brokers to sell their funds to clients. That payment is often an annual fee for as long as the client is invested in the fund — a particularly pernicious conflict of interest that gives brokers incentive to keep clients in high-priced and often poorly performing funds. As fiduciaries, brokers would most likely have to abandon the practice or at the very least disclose it to their clients.

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