Data & Research April 21, 2016
Advisers Say Fiduciary Rule Will Help Business
More than half of advisers polled think the DOL regulation will help their businesses by levelling the playing field on retirement advice and eliminating competition.
Reported by Corie Hengst
Fifty-one percent of advisers think the Department of Labor’s (DOL) final fiduciary rule will help their businesses, according to a live webinar poll from Pioneer Investments.
Advisers who agree that the final rule will help their businesses think it will level the playing field on retirement advice and eliminate competition from those not willing to accept fiduciary responsibility. Last year, prior to the final rule, only 27% of advisers thought the same, and 38% felt that it would hurt their business and impact profitability. This year, only 27% felt that it would hurt their business and 15% indicated it would be a non-event.
“The key takeaways are the majority of advisers now feel that managing their practice in line with the new regulation will help their business, and there is still a significant percentage of advisers who remain concerned that it could hurt their business,” says Mark Spina, executive vice president and head of U.S. intermediary distribution at Pioneer Investments. “This reinforces our belief that the importance of providing timely, educational information to financial advisers has never been greater than in today’s regulatory environment.”
Forty-seven percent of advisers polled in the recent survey believe that the new rule will hurt investors by raising costs and limiting the availability of advice for small- and middle-income investors. On the other hand, 37% believe it will help investors by placing their best interest first with fewer conflicts of interest to drive better outcomes, and 10% think it will be a non-event for investors. In 2015, 42% of respondents thought that the proposed rule would hurt investors, 32% thought that it would help and 8% thought that it would be a non-event.
“I certainly agree that there is going to be a significant transition period, and that always entails some level of cost,” says Blaine Aikin, executive chairman at fi360. “But if you look longer term, the benefits definitely are there for the investors, and I expect will ultimately pay off, so it makes sense that the industry is divided on this.”
NEXT: Effect on IRAs and moreWhen asked how the fiduciary proposal will affect their IRA rollover business, 49% of advisers indicated that it will have little to no effect, and 23% expect a moderate to high negative effect. Only 12% indicated there would be a moderate to high positive impact on their IRA rollover business, and 16% were unsure. These results were about the same as they were in 2015.
Responses from advisers varied regarding the Best Interest Contract Exemption (BICE). Sixty-one percent say they use a level compensation model and will not need to rely on BICE routinely, while 17% use a non-level compensation model and will need to rely on BICE routinely. Twenty percent indicated that they will change from a non-level to a level compensation model to avoid BICE, while only 2% indicated they will change from a level compensation model to a non-level compensation model.
When it comes to what broker-dealers will do in response to the regulation, 36% of advisers expect they will offer more level compensation products to avoid BICE. Thirteen percent expect that they will rely on BICE to continue providing products with compensation conflicts, and 8% expect that they will integrate a digital robo platform to support small or potentially orphaned accounts. Thirty-percent of advisers weren’t sure.
The webinar, titled “The Fiduciary Regulation is Here… Are You Ready?” was attended by 861 financial advisers and featured a panel of fiduciary experts from fi360 and Drinker Biddle & Reath, LLP.
Advisers who agree that the final rule will help their businesses think it will level the playing field on retirement advice and eliminate competition from those not willing to accept fiduciary responsibility. Last year, prior to the final rule, only 27% of advisers thought the same, and 38% felt that it would hurt their business and impact profitability. This year, only 27% felt that it would hurt their business and 15% indicated it would be a non-event.
“The key takeaways are the majority of advisers now feel that managing their practice in line with the new regulation will help their business, and there is still a significant percentage of advisers who remain concerned that it could hurt their business,” says Mark Spina, executive vice president and head of U.S. intermediary distribution at Pioneer Investments. “This reinforces our belief that the importance of providing timely, educational information to financial advisers has never been greater than in today’s regulatory environment.”
Forty-seven percent of advisers polled in the recent survey believe that the new rule will hurt investors by raising costs and limiting the availability of advice for small- and middle-income investors. On the other hand, 37% believe it will help investors by placing their best interest first with fewer conflicts of interest to drive better outcomes, and 10% think it will be a non-event for investors. In 2015, 42% of respondents thought that the proposed rule would hurt investors, 32% thought that it would help and 8% thought that it would be a non-event.
“I certainly agree that there is going to be a significant transition period, and that always entails some level of cost,” says Blaine Aikin, executive chairman at fi360. “But if you look longer term, the benefits definitely are there for the investors, and I expect will ultimately pay off, so it makes sense that the industry is divided on this.”
NEXT: Effect on IRAs and moreWhen asked how the fiduciary proposal will affect their IRA rollover business, 49% of advisers indicated that it will have little to no effect, and 23% expect a moderate to high negative effect. Only 12% indicated there would be a moderate to high positive impact on their IRA rollover business, and 16% were unsure. These results were about the same as they were in 2015.
Responses from advisers varied regarding the Best Interest Contract Exemption (BICE). Sixty-one percent say they use a level compensation model and will not need to rely on BICE routinely, while 17% use a non-level compensation model and will need to rely on BICE routinely. Twenty percent indicated that they will change from a non-level to a level compensation model to avoid BICE, while only 2% indicated they will change from a level compensation model to a non-level compensation model.
When it comes to what broker-dealers will do in response to the regulation, 36% of advisers expect they will offer more level compensation products to avoid BICE. Thirteen percent expect that they will rely on BICE to continue providing products with compensation conflicts, and 8% expect that they will integrate a digital robo platform to support small or potentially orphaned accounts. Thirty-percent of advisers weren’t sure.
The webinar, titled “The Fiduciary Regulation is Here… Are You Ready?” was attended by 861 financial advisers and featured a panel of fiduciary experts from fi360 and Drinker Biddle & Reath, LLP.