As the financial industry counts down to the anticipated release of the U.S. Department of Labor’s fiduciary rule on Wednesday morning, the rest of the world spins unaffected.
For registered investment advisors, who are already required to offer advice as fiduciaries, the sometimes fierce arguments surrounding the rule have occurred in a vacuum.
Most clients are blissfully unaware of the debate, said Scott Tucker, a dually registered advisor in Chicago.
“I really haven’t heard anything except from a few prospects,” Tucker said. “Some of them are knowledgeable about it because their existing non-fiduciary advisor is doing workshops to tell them that they’re changing over to a fee-only process.”
Labor Secretary Thomas Perez will announce the final version of the fiduciary rule, which will establish a fiduciary standard for advice delivered on retirement accounts, at the Center for American Progress, according to recent reports.
Even though he operates as a fiduciary himself and argues that all advisors should act as one, Tucker is skeptical of the DOL’s rule.
“I think it’s well-intentioned, but it will end up being harmful to consumers,” Tucker said. “I think that the rule will create more compliance costs to advisors and thus increase costs to consumers.”
Tucker said that the new rule will force broker-dealers to either go out of business or change their business, which he laments as unfair because “there are a lot of perfectly good broker-dealers out there.”
But the decline of large broker-dealers can’t be attributed to pending federal regulation, said Derek Holman, managing director at EP Wealth Advisors in southern California.
“This disruption has already been occurring,” Holman said. “Ten to 15 years ago, the RIAs and the independent channels were a small part of the business and as we’ve gained momentum we’ve brought down costs and more people have sought out unbiased advice. The industry has known for a long time that, ultimately, things had to change.”