One of those advisers is Mike Welker, president and CEO of the Bogdahn Group, which provides fiduciary institutional investment consulting to retirement plans and other corporate clients. Welker explains that he leads the firm’s relationships with its largest clients, so he is intimately familiar with the way the fiduciary rule debate is playing out in the trenches of client meetings and business strategy sessions.

He tells PLANADVISER he has witnessed an extensive amount of talk and handwringing in the advisory industry about how a strengthened fiduciary standard—like the one endorsed by President Obama and anticipated from the Department of Labor (DOL)—could lead to a higher cost of advice and will stigmatize familiar and accepted business practices. Even more concern arose when, a few weeks back, the Securities and Exchange Commission (SEC) also signaled its intent to work for a uniform fiduciary standard applying to all professionals giving financial advice, retail or institutional.  

“I can understand the concerns of the broader advice firms that feel they will be damaged by stricter rules,” Welker says. “But I also know that, in our industry, there are just so many ways for the adviser to get paid. It’s not a bad thing per se, but the client often doesn’t know or fully understand the rules and regulations that dictate how things are supposed to work around compensation. And so, we welcome all this scrutiny that is coming out. We want the [fiduciary] standard to apply to anyone that offers advice to either institutional or retail clients. That’s healthy for the end investor.”

Welker admits his firm, importantly, has less skin in the game than others, because since its founding in 2000 the Bogdahn Group has sought to give solely conflict-free investment advice. It does not have partners that sell investments or recordkeeping products, nor does the firm engage in individual wealth management advice outside the fiduciary context, he explains.

“We are not unique in making the fiduciary standard an important part of our model—many firms have the same outlook that we do,” Welker says. “We love this debate and we’re trying to have this debate wherever we can, just because it’s so important for the client and because it factors deeply into our firm strategy and identity.”

Welker is only a little worried that a new rule could be structured in a way that will ultimately drive down the top-line number of people currently receiving professional financial advice.

“It could be challenging for advisers that aren’t as focused as we are on being institutional investment fiduciaries—the broader firms that do a lot of wealth management and have many different interests beyond just strictly advising—to adjust to the new standard,” he feels. “It’s going to expose a lot of people to a new type of competition and a need to really put the client first. You could see fees go up among some firms, I think, who feel they need to be compensated for the extra risk they feel they are taking on, being named as fiduciaries.”

He urges the DOL and SEC to “think deeply about this possibility, but again, it’s going to position some other firms in a great way—those who are already meeting the standard. And the costs of doing business as a fiduciary may not be such a big hurdle as some are anticipating, depending on the approach taken by DOL and SEC.”

A new survey report from fi360, “Seeking Trustworthy Advice For Individual Investors,” seems to back up that point. The survey’s results “flatly refute the implication that it costs more to work with an adviser who puts the investor first, or that smaller investors would be shut out of the market for fiduciary advice,” researchers note.

“Does it cost investors more to work with a fiduciary? No, according to financial intermediaries working with client investors every day,” the report continues. “In fact, survey participants say the opposite is true—that operating under the higher standard saves clients’ money. They say the fiduciary standard does not cost investors more, or reduce product or service choice, or price some investors out of the market for investment advice compared to a broker operating under the less stringent suitability standard.”

A vast majority of polled advisers (91%) says it does not cost more to work with a fiduciary adviser than a “suitability standard” broker. At the same time, a similar majority (83%) says a fiduciary standard would not price small investors out of the market for advice.

The Obama administration’s claim that U.S. investors don’t understand the differing standards applying to different types of advisers and brokers also seems to be borne out in the data: Fully 97% of advisers believe investors “don’t understand the differences between brokers and investment advisers.” About three-quarters of advisers (72%) also believe the titles “adviser,” “consultant” and “retirement/financial planner” imply that a fiduciary relationship exists, and 84% say disclosures alone are not enough to manage conflicts of interest.

Welker concludes by noting he is confident that the DOL, SEC and other regulators will be able to find a middle ground between the wants of the industry providers and the needs of individual investors. Like others, he anticipates a huge industry response when rulemaking language actually emerges, followed by a tough debate that could even become a popular issue in the 2016 presidential election.