The DOL rule is current regulation until otherwise announced, so firms must continue
their work. The expenses are mounting, and some may find the road ahead is better than stopping.
Boston, November 29, 2016 - The U.S. Department of Labor’s (DOL’s) fiduciary rule affects a US$23 trillion U.S. retirement market. The rule’s most significant calls to action are acting in the best interest of the client and transparently indicating client expense. Everything cascades from these missions. Financial institutions (FI) and financial advisors are on the hook to provide evidence of acting in the client’s best interest, at fair prices, and for reasonable compensation. Legal and political forces are in play to eliminate the fiduciary rule, yet the outcome may not be complete abolishment.
Due to the fiduciary rule, key industry trends have been picking up, including industry consolidation, lowering investment product fees, and a shift to passive investments, digitization platforms, and the consultative approach in fee-based business. Aite Group interviews suggest that firms already in transition to fee-based business will accelerate the process; firms that wish to provide flexibility to financial advisors and clients will remain in a hybrid mode utilizing the Best Interest Contract Exemption.
Could all of this be undone and the sunk costs put aside? Would the industry and its clients want to? The word “fiduciary,” with its deep grounding in the trusted relationship, arrives for the retail business at a time when the population is suspicious of the status quo. Keeping the designation while modifying the rule implementation might benefit all parties.
“Positions in political campaigns do not always find their way to implementation,” says Aite Group senior analyst Denise Valentine. “The new administration has many regulatory priorities, from healthcare to international trade to financial services. Until the court cases work through the system and Congress’ dialogue begins, any position is guesswork.”
The campaign made clear the president-elect is not regulation-friendly. He is currently building his advisory staff, which will influence decisions, and the republican-dominant Congress has some variance of opinion on priorities and outcomes.
Aite Group’s latest report, DOL Fiduciary Rule: Has the Train Left the Station?, explores the DOL fiduciary rule’s impact on FIs and financial advisors while recognizing that this topic is in an iterative stage with much work still underway and decisions as yet unmade. The brokerage and level-fee business will likely reshape themselves over the coming years as the industry hits a reset button—the first report in this series focuses on compliance, metrics, and technology that market participants can use to progress toward the rule’s implementation and can be found here.
To request a press copy of this report or to speak with Denise Valentine about this topic, please contact us at firstname.lastname@example.org
About Aite Group:
Aite Group is a global research and advisory firm delivering comprehensive, actionable advice on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, insurance, wealth management, and the capital markets, we guide financial institutions, technology providers, and consulting firms worldwide. We partner with our clients, revealing their blind spots and delivering insights to make their businesses smarter and stronger. Visit us on the web and connect with us on Twitter and LinkedIn.