• Morningstar anticipates mixed results both for active asset managers, such as AllianceBernstein, Invesco, T. Rowe Price and others, as well as for full-service wealth management firms, including Bank of America, Morgan Stanley, Raymond James Financial, Stifel Financial, UBS and Wells Fargo.
“Both of these groups will be materially affected by the prohibition on third-party payments,” according to the report. “That said, we believe that firms with moats will gain market share from their less competitively advantaged peers or that they’ll be able to adjust their business model to offset the negative financial effects of the rule.”
Indeed, full-service wealth managers could ultimately be beneficiaries by converting commission-based IRAs to fee-based IRAs to sidestep compliance costs associated with the proposed DOL rule. Because fee-based accounts can produce up to 60% more revenue than commission-based accounts, that could equate to an extra $13 billion of revenue for the wealth management industry.
Less clear is how the rule would impact smaller, independent brokerages. “The large brokerages will be able to pay for the cost of compliance and possibly shift their business models,” Wong says. “But the independent brokerages have much less flexibility than the larger wealth management firms to adapt to the rule.”