Fiduciary Rule-Driven Practice Changes Coming Into Focus

As an advocacy group for retirement plan service providers and investment managers, the SPARK Institute has been at the center of the debate over the Department of Labor’s final fiduciary rule. 

A recent survey of retirement plan services providers conducted by the SPARK Institute identifies some of the ways providers are planning to modify their business practices to work within the new fiduciary regulatory structure

Tim Rouse, executive director of SPARK, explains the poll focused on SPARK Institute members, garnering more than 100 detailed responses from some of the leading retirement plan services firms. Unsurprisingly, many say they are still in the process of analyzing the regulations, while others are vocally worried about the potential impacts of the fiduciary rule, even with a significant amount of pull-back and compromise in the final rule compared with the previous proposed versions.

Among SPARK member firms, 14% indicated they believe they would become a fiduciary for the first time under the new regulations, while 23% would continue to be a fiduciary, and 30% said they planned to continue under a non-fiduciary status.

“However, 34% of firms indicated that they are unsure which direction to take,” Rouse warns. “While about half of the members don’t plan to make major strategic business changes, the other half have already decided to fundamentally change their business model, or are still considering whether to do so. This level of change will likely take years to play out fully in the market.”

NEXT: Uncertainty remains 

According to SPARK's polling, the responses also indicate “a fair degree of uncertainty yet to be answered and decisions to be made.” 

For example, almost 80% of firms surveyed said they are “still evaluating risks and requirements of the regulations.” At the same time, 60% indicated that key parts of the regulation are still not clear; 75% are watching to see how their peers are interpreting and addressing the regulation; and 49% are looking for guidance from industry organizations.

According to Cynthia Hayes, president of Oculus Partners and co-author of the survey, “these responses indicate that the industry is still in a mode of absorbing the final language of this massive new regulation, and is going to inevitably rely on strong support from organizations like SPARK, and further guidance from the regulators. Even with all the changes the DOL has made to make the regulation more practical, there is still a massive amount of language to study, and already providers can see significant change required in business practice governance and oversight.”

Respondents also indicated that they are thinking about more than simple compliance, according to SPARK. A strong majority (80%) indicate that they “want to understand how the regulation will change the competitive landscape,” while 60% “want to understand the impact on the advisers with whom they work.” Less than half (40%) are “actively looking at new product ideas as a result of the regulation.”

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