“This proposal, if enacted, would limit the ability of Americans to continue to receive personalized investment guidance for retirement plan accounts, which would result in a less secure retirement for many,” Kenneth Bentsen Jr., chief executive of the Securities Industry & Financial Markets Association, an industry group, wrote in one of more than 3,000 comments on the proposed “conflict of interest” rule last year.
Advocates of the rule say it may generate new insurance and investment business models that cost less and aren’t as likely to exploit the unsophisticated.
“The marketplace was changing anyway,” says Mitchell Caplan, CEO of Jefferson National, an insurance company which sells products to fiduciary advisors. He predicts that, in the future, technology will help fiduciary advisors serve more clients more efficiently. “There will be lots of companies and business models that continue to evolve,'' he says.
Much depends on how the final rule is implemented. In the initial proposal, firms handling retirement accounts needed to sign a contract with clients making clear they’d put their interests first. Figuring out what this means exactly may take a while, as courts could end up being the final arbiter of the rule’s language. It’s also not clear how the final rule would be enforced, though it might leave noncomplying firms open to penalties or lawsuits.
Whatever regulators and judges decide, many investors have already made a clear choice, as the number of investors willing to pay load fees has plunged.
MacGregor is among them, having switched his account to a fiduciary advisor charging him 0.5 percent per year. McChester- Nedd moved her money into cash and is still figuring out what to do with it. “This stuff is very complicated,” she says, adding she's “bewildered” by “inconsistent and inaccurate” information.
McChester-Nedd is confident, though, that she’ll figure it out eventually. Still, she worries about friends and family without her business background: “They’re totally at the mercy of the system.”