Labor Secretary Alexander Acosta’s announcement that the new fiduciary rule will go into effect June 9 as planned will dramatically impact the lives of financial advisors who deal with retirement plans, according to advisors, lawyers and consultants.

Full implementation of the rule for broker-dealers and advisors is still set for Jan. 1, but the portions effective June 9 represent a seismic shift for many advisors, who have been preparing for months, industry insiders say.

Even before it was declared valid by Acosta on Monday, the rule already has pushed firms to abandon commission products and move to fee-based advice and enact measures to promote transparency. Advisors are required under the rule to put the best interests of the client first, have impartial standards and reasonable compensation, and not make any misleading statements.

But even Acosta says in an op-ed piece in the Wall Street Journal that he is still seeking public opinion on what he calls a controversial regulation.Prof. Jamie Hopkins, co-director of the Retirement Income Program at the American College, says even the Jan 1 final implementaton could be delayed. Also between now and Jan. 1, Trump’s deregulation demands may still be met and the DOL could moe forward to try to overturn or modify the rule, Hopkins says,

Consumers will come out ahead under the rule, advisors say.

“The consumer is the one who will win under the DOL rule. Why should consumers put their savings in the hands of someone who is not looking out for their best interests?” asks Michelle Brownstein, director of private client services at Personal Capital in San Carlos, Calif., which has $4.2 billion in AUM. The problem is “when you explain the fiduciary standard that is required under the DOL rule, the client may ask why you have not been putting their best interests first all the time.”

“This is clearly in the best interests of the American people,” agrees Paul A. Pagnato, CEO and founder of PagnatoKarp, an independent wealth management firm in Reston, Va., with $3 billion in assets under advisement. “It raises advice to a new level although I’d rather see it applied to all assets, not just retirement. I expect there to be some refinement in the next few months, but every time something like this occurs the American public becomes more educated about finances.”

Advisors also may be winners with the enactment of the rule, says Mark Kemp, founder of Kemp Harvest Financial Group, a wealth management firm based in Harleysville, Pa., which has $268 million in AUM. “Now is a great opportunity for financial planners to get their house in order. They should look at how they budget and at their cash reserves, just like we tell our clients to do. The awkward part of switching from commissions is that until an advisor has enough clients on fees or a percentage of AUM, they do not have as much money coming in.”

The Securities and Exchange Commission could still enact a uniform fiduciary rule for all financial services, and many advisors would prefer that. “We feel the SEC could act this year and propose a uniform rule. It would be easier to deal with all clients in the same manner under an SEC rule, rather than carve out retirement clients for special treatment under the DOL rule,” says Todd Cipperman, managing principal of Cipperman Compliance Services in Wayne, Pa., which acts as a chief compliance office for advisors.

Cipperman says his firm has been “telling our broker-dealer and dual registered advisors that being a fiduciary is the way the world is going anyway. They should have been ready for the original April 10 deadline [which was postponed until June 9], so they should be ready for this one.”

“Advisors should be training themselves and their staffs on what it means to be a fiduciary. The term ‘fiduciary’ has hit the mainstream. We firmly believe that those who embrace the fiduciary standard have an opportunity to both improve investor outcomes and their own business prospects,” says John Faustino, chief product and strategy officer at Fi360 based in Pittsburgh, a provider of fiduciary-related training and tools for advisors. 

James DelBello, partner at Reed Smith, a global law firm that serves financial advisors, says Donald Trump’s election made the fate of all types of regulations uncertain, “but the amount of scrutiny the rule has been under has drawn attention to the issue of conflicts for financial advisors and broker-dealers. For advisors, looking at their compensation stream makes sense.”

Acosta already has indicated there will be no enforcement of the rule until January 1.

“DOL is developing models and notices for advisors to use and as long as advisors have adopted these practices, they should be fine,” says labor attorney James Olson, a partner with the Philadelphia-based law firm Schnader Harrison Segal & Lewis. If lawsuits are filed under the new rule, “they are going to come from clients who have IRAs rather than from participants in employer-sponsored retirement plans,” he says.

Doug Dahl, an employee benefits attorney at Bass, Berry & Sims in Nashville, adds some advisors may decide to exit the retirement planning sector of the financial industry or they may close up shop altogether rather than deal with lawsuits and enforcement issues.

“The DOL likes to talk about how this rule is based on principals, but it is very complex, and it converts even ordinary suggestions from an advisor into regulated advice,” says Steven Rabitz, a compensation/benefits partner with Stroock law firm in New York City who specializes in ERISA law. “I would expect there to be more surveillance and more compliance issues. This will put a lot of assets in motion and consumers in motion. DOL has grossly under estimated the amount of disruption implementing this rule is going to cause.”

Mike Walters, chairman and CEO of USA Financial in Ada, Mich., which has $2.7 billion in client assets, says, “I don’t see someone from DOL or the IRS circling to look for easy pickings among advisors who are not immediately compliant. This is going to be an eye opener for many advisors. They do not realize they are going to have to prove that they disclosed the required information. The biggest challenge that advisors may be overlooking is whether they fall under the exemptions that are allowed under the rule.”

DelBello at the law firm Reed Smith says, “The more technical requirements of the rule present challenges and setting up the internal operations needed to meet the rule are massive. There is not going to be a ‘gotcha‘ by the DOL or IRS for someone who is not totally compliant.”

For firms that are still striving to meet the rule, Alma Angotti, managing director in the global investigations and compliance practice at Navigant Consulting, a global business and financial services consulting firm based in Chicago, advises, “For firms that are behind the eight ball, we’re telling them to do the things that make sense first, such as providing training for staff on sales practices for IRAs. They should also have the policy ready to change compensation structure.

“They need to make sure their reps understand the complex products they are recommending. DOL and IRS will be looking for a good-faith effort before they punish anyone. They will also give guidance on the exemptions that are allowed,” she adds

At the same time, most firms already have put effort into complying.

“A lot of broker-dealers have invested millions of dollars to enable them to compete in the post-DOL retirement space. New technology is going to continue to be needed or they will wash out of the qualified retirement business. Advisors also have to know that complying is going to come with a higher degree of paperwork,” says Jason Grantz, director of institutional retirement consulting at Unified Trust Company based in Lexington, Ken., a retirement plan provider with $4 billion in assets. He also sits on the Government Affairs Committee of the National Association of Plan Advisors.

“People are now asking for a fiduciary, so advisors should move forward -- go to fee-based with level fees. Some advisors I have talked to want to continue to do commission-based work, but that is going to be a problem. There will be specific documentation that has to be added and clients may have more forms to sign to acknowledge they were told certain things,” adds David Rae, vice president of client services at Trilogy Financial Services, Los Angeles, with $2 billion in client assets.

If all firms are fiduciaries, at least for retirement planning, it may be harder to differentiate themselves from the competition.

“Some firms are going to continue to try to serve everyone, but many will develop a niche clientele and specialize, such as dealing with education issues or the LGBT population. The services and capabilities the firm has will also differentiate them,” says Alex Benke, an advisor at Betterment, a financial services firm based in New York City that provides outsourcing services for advisory firms and has client-facing advisors and more than $9 billion in AUM, according to the latest ADV.

“Price will also be a differentiator. If firms can’t do commissions, they have to think where the revenue is going to come from and how to use technology and outsourcing to bring costs down. Betterment is a huge supporter of the rule. We think those who say that this is going to hurt small investors are wrong,” he adds.

The Insured Retirement Institute disagrees. “IRI remains committed to supporting a best interest standard; however, the DOL rule is already having harmful impacts on Americans plannng for retirement,” IRI said in a statement. “Financial professionals will stop serving small-account savers, orphaning these Americans from the financial help they need. A wide array of financial service providers are responding to the rule’s litigation risks  by limiting investment types and products they will recomment.”

The American Council of Life Insurers seconded the idea that the DOL rule would limit people’s options. “As burrently written, the regulation limits retirement savers’access to education and information about annuities, the only financial products in the marketplace that guarantee lifetme imcome.” the council said in a statement.