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The report says advisors perceive the potential for “unlimited liability” under the rule, as they fear being found responsible for investment losses due to unintentional or unforeseeable events, such as a recession or a protracted low economic growth.

But under the rule, advisors will not be signatories to the Best Interest Contract exemption — the contract will be between their advisory firms and individual investors. That advisors perceive themselves as directly culpable under the contract — and not their firms —s uggests to Sharigian “some level of confusion that is breeding a culture of fear” among advisors, and the need for firms to invest further in advisor education regarding the rule.

Advisors want clarity

Even before finalization of the rule, advisors were feeling the strain of compliance requirements, the report suggests, as advisors within the wirehouse, independent and registered investment advisor channels report feeling burdened by internal compliance departments.

And independent registered investment advisors, who already operate under a fiduciary standard, do not expect to be exempted from the rule’s new compliance standards, as those independent firms will have to adopt new documentation standards without the aid of large, centralized compliance departments.

In an interview with BenefitsPro, Sharigian said the extent and quality of support in helping advisors comply with the rule could prove to be a new carrot in recruiting advisors.

“It certainly makes sense for the advisory firms that provide the best-in-class compliance support to use that as leverage as a potential recruiting tool,” she said.

While concern was noted from advisors across distribution channels, some registered investment advisors’ responses were welcoming of the rule. One respondent suggested the rule will ultimately lead to greater trust for the financial services industry. Other fee-based advisors expect the rule to push business their way.

One registered investment advisor’s response suggested greater clarity from the Labor Department is necessary as regulators tend not to clarify what the rules exactly are until they are broken; and one hybrid registered investment advisor respondent echoed a long-running criticism of the rule, claiming it will force small investors out of the advisory market.

Another hybrid registered investment advisor suggested those clients better served by a commission, or transactional-based relationship, will be forced to a fee-based structure, to the benefit of the advisor.

One respondent, an advisor with a wirehouse, echoed that sentiment, saying commission-based C-shares of retail investments would be cheaper for a $500,000 account than would an annual asset-based fee.

While advisors say regulatory concerns are certainly top of mind, ultimately, they are more concerned with the low-yield investment environment, which will limit investors’ returns, and ultimately advisors’ fee-based compensation.

One hybrid advisor noted that as yields are coming down, fees are not, meaning the cost to invest will account for a greater portion of an individual’s portfolio.