The final shape of the U.S. Department of Labor’s proposal to apply a fiduciary standard to retirement plan advice is due out soon, and the brokerage industry and others are bracing for its impact.

But some people posit the rule will spur product and platform innovation in the U.S. wealth management business, and Cerulli Associates is among that group. In a new research report, the Boston-based financial services analytics firm said the DOL’s proposal––which seeks to eliminate conflicts of interest in retirement plan advice––will likely lead lead to new technology and products enabling brokerages to serve smaller retirement accounts on a flat-fee basis.

The DOL’s proposal would apply a fiduciary standard to all financial advisors providing investment advice for a fee to a retirement account plan or participant. The brokerage and insurance industries say the DOL’s efforts to redefine investment advice under the Employee Retirement Income Security Act of 1974, or ERISA, will subject their member firms, many of whom abide by the suitability standard, to a fiduciary standard that will add compliance costs making it too costly to provide advice to retirement plans with small accounts.

The DOL wouldn’t ban current compensation arrangements such as commissions, trailing commissions, 12b-1 fees and the like––i.e., sales practices that are considered conflicted and are no-nos under ERISA––as long as firms provide clients with a Best Interest Contract Exemption (BICE).

Among other features, this contract would require the advisor and financial institution to contractually acknowledge fiduciary status; commit to adhere to basic standards of impartial conduct; warrant that they have adopted policies and procedures reasonably designed to mitigate any harmful impact of conflicts of interest; and disclose any potential conflicts of interest pertaining to compensation and other fees.

In addition, firms relying on the exemption would have to notify the DOL in advance of doing so, and would have to maintain certain data––and make it available to the DOL–– to help evaluate the effectiveness of the exemption in protecting the interests of the plan participants and beneficiaries, IRA owners, and small plans.

The brokerage and insurance industries maintain that all of these BICE demands would make it too burdensome and expensive to service small retirement plans. The end result would be countless investors without professional advice on their retirement savings, they say.

Ultimately, says Cerulli, the wealth management industry will adjust, and in doing so will change the way business is done.

Bing Waldert, managing director at Cerulli, notes that the impact of the DOL’s proposed conflict of interest rule may not be immediately felt but will eventually lead to a period of product and platform innovation at broker-dealers and product manufacturers.

“Cerulli expects there will be unexpected changes to the retirement and wealth management industries, and, to a degree, this cultural evolution is what the proposed rule is hoping to effect,” Waldert wrote in the first quarter 2016 issue of The Cerulli Edge – Retirement Edition report.

The report states that two areas that could be impacted by the DOL rule are annuities and robo-advisors, or digital advice platforms.

Regarding the former, Cerulli says that while the investment community increasingly realizes the value of guaranteed income streams, annuities violate the DOL’s proposed rule because they typically are priced with an advisor commission and many manufacturers pay revenue sharing to distributors.

To comply with the new rule, Cerulli says it foresees two main changes in annuity pricing–– pricing products for inclusion on fee-based managed account programs, and adjusting expenses and commissions to be more in line with mutual funds.

“The crux of the challenge for insurance companies is that annuities must compete against other financial products on their value to the consumer and not compensation to the advisor,” the report says. “The Conflict of Interest rule may ultimately be a wake-up call for the insurance industry to evolve the way it does business.”

As for robo-type platforms, Cerulli says their scalable trading technology, algorithmic portfolio construction and reliance on low-cost exchange-traded funds could help B-Ds comply with the DOL rule.

To illustrate that point, it cites the potential impact from two relatively recent purchases of robo-advisors by asset management companies––BlackRock’s acquisition of FutureAdvisor last August, which aims to provide financial advisors and other intermediaries with a digital platform to serve mass affluent investors and millennials; and Invesco’s agreement in January to buy Jemstep, a robo platform that has been popular with advisors.

Cerulli notes that one of the first adopters of BlackRock's FutureAdvisor platform was regional brokerage RBC Wealth Management, which has said the technology platform could help it serve smaller-sized retirement accounts because it charges a flat fee that would comply with the DOL’s proposed rule.

“An offering similar to FutureAdvisor may not be on every B-D’s radar, but it represents the type of innovation that providers need to consider as implementation of the Conflict of Interest rule approaches,” Cerulli says.