The wealth management house has performed something of a U-turn over its decision in 2016 to scrap commission payments for retirement accounts, reflecting how the Department of Labor Fiduciary Rule has become a dead letter.

Merrill Lynch Wealth Management has abandoned its 2016 decision to scrap commissions for brokers serving clients' retirement accounts, a move coming after the Department of Labor Fiduciary Rule hit legal obstacles in recent months.

The firm, part of Bank of America, said it will again allow commission-based brokerage activity in client retirement accounts starting from October 1. The business has acted on the expectation of how new rules will be enforced by the Securities and Exchange Commission.

"While we will enable brokerage capabilities in retirement accounts, I want to reiterate that the primary way clients receive fiduciary advice and guidance for all accounts is through the Merrill Lynch Investment Advisory Program, which remains our foundational platform for serving clients," Andy Sieg, head of Merrill Lynch PWM, said in an internal memo seen by Family Wealth Report.

This move is a U-turn for a business that had made much noise about how it was ending trail commission payments to advisors. Rival firm Morgan Stanley, meanwhile, continues to give clients a choice of whether they want fee-based advice or the older brokerage model.

The changes reflect how the Department of Labor Fiduciary Rule, which had introduced a "best interests" test on how firms should treat clients, has proven controversial. The effect of the rule - which has encountered legal and legislative roadblocks - was to encourage a shift towards fee-based advice. To some degree that rule mirrored the example of the UK's Retail Distribution Review reform of 2013, which had the effect of scrapping commission payments. As the UK found, however, the RDR forced many advisors to go out of business, or pressured them to sell their firms, creating in some cases a so-called "advice gap" .

The Merrill Lynch PWM memo acknowledged that the end of the DoL Fiduciary Rule, and guidance from the SEC on a "more comprehensive Best Interest standard", had prompted it to act.

"It’s important to note that Merrill Lynch has publicly and consistently supported a fiduciary standard; we have argued for a higher standard of care for all investment advice, client choice on how to pay (advisory fee versus brokerage), and consistent regulations across brokerage and investment advisory relationships," the memo said.

Last November, Merrill Lynch brought out a new compensation scheme for advisors.