Consistent speculation that the Trump administration will delay the April 10 implementation date for the Labor Department’s fiduciary rule may be encouraging record-keepers to pause compliance outreach to defined contribution advisor specialists.
New data from Cogent Reports, a division of Market Strategies International, shows about half of defined contribution advisor specialists don’t feel they are getting adequate compliance support from record-keepers.
“It’s clear that advisors are looking for support from service providers,” said Sonia Sharigian, senior product manager of syndicated research at Cogent and author of two studies that explore the fiduciary rule’s impacts on DC advisors and participants.
Despite the desire for support, Sharigian says a recent survey shows it’s lacking among all advisor specialist channels. Among RIA specialist advisors, only 41 percent said record-keepers have shown willingness to partner and support business modification requirements under the rule.
|Fiduciary rule holding pattern
With less than 10 weeks to the first scheduled implementation date, Sharigian is confident that record-keepers have developed compliance and outreach efforts. But talk of the rule’s delay, and potential rewriting, has forced at least some of the industry into a holding pattern.
“Everyone is in a wait and see approach right now,” said Sharigian. “It could very well be that record-keepers have outreach plans in place but they are waiting for greater clarity on the fate of the rule.”
Facilitating plan specialists’ compliance and education efforts under the rule could create a new competitive lever for record-keepers, which view plan specialists as vital marketing conduits in the increasingly competitive retirement plan space.
“Advisor specialists already have a limited set of considerations for how they choose record-keepers,” noted Sharigian.
But extending outreach efforts when the consensus of industry analysts is predicting a delay, at the very least, of the rule may not be a wise utilization of resources, suggested Sharigian. Rather, initiating a coordinated outreach may be more practical when industry is not distracted by persistent speculation of the rule’s fate, she said.
|RIA specialists’ impressions widely different from brokers’
Overall, RIA plan specialist advisors, who serve in a fiduciary capacity, are more comfortable with the rule relative to advisors in the broker-dealer and bank channels.
Only 29 percent of RIA advisors strongly support repeal of the rule, compared to 69 percent of advisors affiliated with independent broker-dealers and 82 percent of advisors affiliated with the banking channel.
And only 6 percent of RIA specialists say the rule will limit investment product selection, compared to 44 percent of advisors affiliated with a regional broker-dealer. One in 10 RIA advisors feel the rule has tarnished the financial service industry’s reputation, compared to about four in 10 of broker-dealer affiliated advisors that think so.
Sharigian suggested the fact record-keeper outreach has not been initiated in earnest by some record-keepers means advisors may not yet be completely clear on how the rule would impact key business decisions, such as which investments to recommend. An increased flow to lower-cost passively managed mutual funds is expected if the rule is implemented as it is written.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
