Adviser awareness of the investment advice regulation proposed by the Department of Labor (DOL) is industry-wide, with four out of five at least somewhat aware of the proposal and 73% concerned the rule will have a negative impact on how they do business.
The top concerns about the rule are: it will increase the time spent on compliance tasks, raise the cost of business and affect adviser compensation.
According to Tom Corra, chief operating officer of Fidelity clearing and custody solutions, a number of advisory firms are considering re-evaluating their service models, the products they recommend and the investors they serve in response to the pending DOL fiduciary rule. The changes are especially concerning to broker/dealers, but they are not the only ones. “Many registered investment advisers who are already held to a fiduciary standard under the Investment Adviser Act are also seeing the rule as challenging, particularly its impact on their rollover and IRA business,” Corra says.
According to the survey, 53% of advisers say their firms plan to wait until the DOL rule is finalized before undertaking any substantial action.
In addition to the research, Fidelity has drawn up a list of “Six Ways to Help Prepare for the Proposed DOL Investment Advice Rule and Capturing Opportunities Created by the Proposed DOL Investment Advice Rule.” The resource outlines steps to consider so advisers can begin preparing for the changes.NEXT: Six steps to consider
- Develop a fact base for your existing retirement business: Understand the full scope of your firm’s retirement business.
- Review business practices and procedures: Consider carefully reviewing business practices and procedures in several key areas, including education, rollovers and referrals.
- Understand the potential financial impact of the proposed rules: consider high-level scenario planning to better understand the potential revenue impact and technology and compliance costs to implement provisions of the rule.
- Explore potential new business models and segmentation strategies: The rule includes a number of approaches to compliance. Firms may consider different models for different segments of their clients and different types of adviser.
- Identify changes to infrastructure and support that are likely to be essential for rule implementation: Firms may look to invest in technology and/or additional talent to ensure compliance. Investing in improved workflow may also help reduce the rule s new costs and time requirements.
- Consult with internal and external experts as you develop your plans: Given the complexity of the proposed rule, firms should engage legal, tax and compliance experts to help them fully understand its implications and ensure that their plans comply with the new regulations.
The Expectations of Upcoming DOL Ruling study was an online, blind survey fielded between January 5 and January 12. Participants included 485 advisers who manage client assets either individually or as a team, and work primarily with individual investors. Adviser firm types included 22 banks, 140 independent broker/dealers, 69 insurance companies, 108 regional broker-dealers, 63 RIAs, and 83 wirehouses.
More information about the survey is on Fidelity’s website.