Merrill Sticks With Fiduciary Rules Trump Targets

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Financial institutions have been stuck in an awkward position since the election of President Donald Trump as they try and figure out what direction his regulatory policies will take.

Of particular concern for companies with a wealth management division are the new Department of Labor fiduciary rules that were slated to get into effect April 10.

The Barack Obama-era rules require wealth managers to be more transparent about fees charged and force brokers to act as fiduciaries and minimize conflicts of interest. The Trump administration has signaled it could trim those rules, however, and Congress has already begun that process, leading some banks to sit in a purgatory of sorts.

When asked about their plans to implement the new rules, downtown’s City National Bank – a subsidiary of Royal Bank of Canada – declined to comment, as did JPMorgan Chase & Co.

However, one wealth management outfit is taking an outspoken stance on its fiduciary policy: Merrill Lynch, the investment wing of Bank of America Corp. Newly appointed Merrill Lynch President Andy Sieg said in an interview before Trump signaled a regulatory rollback that the company had planned to implement the new fiduciary rules before the election and wouldn’t stray from that course.

“We’re not reacting to the political winds,” Sieg said. “We’re attuned to them, but we loved our strategy three months ago, and we love it now. We’re focused on clients and doing what’s best for them.”

Sieg said Merrill Lynch would do away with retirement accounts that charged commissions and instead offer a suite of services tailored to consumers. The company last week rolled out one of those offerings, a robo-advisory service dubbed Merrill Edge Guided Investing, which will charge a 0.45 percent fee on assets in the account. The offering is an offshoot of Merrill Edge, a division founded in 2010 to help customers with less than $250,000 in retirement accounts.

Sieg said he and the rest of the Merrill Lynch team were also trying to be proactive about reaching out to regulators.

“We’ve been a leading voice on Wall Street for the best-interest standard and have given lots of feedback to the Department of Labor about the current regulations,” Sieg said. “We will continue to offer up advice as they get into this issue more going forward.”

Greycroft Growth

Arts District venture capital outfit Greycroft Partners announced last week the firm had closed its second growth fund, a $250 million vehicle dedicated to investing in growth-stage tech businesses.

Greycroft co-founder Dana Settle said the new fund is designed to operate in the same space as its first growth-focused vehicle, a 2014 vintage that closed at $200 million and has an average investment of about $18 million.

“We contemplated what the right strategy was – a lot of people go out and raise a much bigger fund – but our current model has been working so well for us we decided to keep it in place,” said Settle, a partner at the firm.

Greycroft is also bringing on e.ventures, a San Francisco-based international venture capital firm, as a partner in the fund. Investments will be split with Greycroft putting a roughly two-thirds portion into each commitment and e.ventures the remaining one-third.

The strategy allows both parties to stretch their money further, according to Settle, and also gives the backed companies some international cache. E.ventures has offices in Germany, China, Japan, and Brazil, among other places.

The focus on growth capital is a strategic move for Greycroft, according to Settle. She said many tech startups outside of Silicon Valley don’t have the same access to this critical capital, which can stunt the expansion efforts of promising companies.

“It’s very hard for companies once they reach a certain inflection point to keep growing if they don’t have access to this type of capital,” she said.

Greycroft also announced it would promote Dylan Pearce to partner. Settle said Pearce had been running the day-to-day operations of the last fund and would continue to do so with the new vehicle.

Houlihan Offering

Century City investment bank Houlihan Lokey announced last week it would offer up 10 million shares of Class A common stock. The firm said 7.5 million shares would come from a new, primary offering, while 2.5 million would come from a secondary offering of existing shares owned by the company’s management and employees.

Houlihan, which had a resurgent 2016 after a lackluster August 2015 initial public offering, plans to use the proceeds of the primary sale to buy back Class B voting shares from Orix USA Corp. of Dallas, according to Securities and Exchange Commission filings. The move would dilute Orix’s voting power from 39.2 percent to 30.6 percent.

Trusts controlled by Houlihan Chief Executive Scott Beiser and Executive Chairman Irwin Gold are selling about 92,000 and 131,000 shares in the offering respectively. Houlihan shares closed at $29.70 on Feb. 8.

Staff reporter Henry Meier can be reached at [email protected] or (323) 549-5225, ext. 221.

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