Even though the implementation of the Department of Labor conflict of interest rule may be delayed beyond its April deadline, it is already shaping how advisors look at the future of their businesses, says Cerulli Associates, a research organization.
The ruling has acted as a catalyst for advisors, broker-dealers and asset managers to re-examine their business models, simplify their cost structures and minimize their risk exposure, the research says.
The ruling also has prompted advisors to look more favorably to the RIA channel as a business model. Nearly two-thirds (64 percent) of broker-dealer advisors plan to shift more of their business toward a fee-based advisory business model, Cerulli says. Forty-seven percent of advisors believe that the RIA business model will become more appealing if the rule is implemented.
“Industry stakeholders are now operating with a heightened sense of regulatory risk and are therefore more likely to be aware of cost and liability. Among advisors, this awareness translates into interest in lower-cost vehicles, such as exchange-traded funds and passive investment products because they can help reduce costs for clients and alleviate concerns about violating fiduciary duty with unreasonable compensation,” Cerulli says.
Forty-five percent of advisors say they intend to increase their use of ETFs and 31 percent expect to use more passive investment products.
Close to half of advisors believe that the RIA business model will become more appealing if the DOL rule is implemented. Wirehouses already have been experiencing steady losses from the continued migration of advisors to the independent space.
The survey included more than 6,000 advisors.