This past St. Patrick’s Day, Labor Department Secretary Thomas Perez told the public he was still studying the proposed fiduciary rule in response to comments that it would effectively leave millions of Americans without access to financial advice.

The concept of placing clients’ interest first is simple. Ethical advisors and brokers don’t challenge it. 

As Secretary Perez is learning, the devil is in the details. Virtually all of the independent advisors I’ve met went into this business because they wanted to help people and saw a huge need for a service that wasn’t there.

Had corporate America not started moving away from pension systems to defined contribution plans, it’s likely that the independent advisory business today would look more like it was—the investment counsel business for affluent people. It would also be a lot smaller.

By this time next year, a new administration could be strangling the fiduciary rule or the rule could be tied up by inevitable lawsuits and various injunctions in the courts. But forward-looking broker-dealers aren’t waiting for what might or might not happen. 

Instead, many are looking to streamline operations so their reps can continue to serve small accounts on a cost-effective basis. They also expect that products like annuities, which many middle-class Americans may need to make their money last over a 30-year retirement, will become cheaper.

Independent brokerages understandably view the DOL rule as a major disruption to their business, but they might want to look back to their  own origins, which were pro-consumer in many ways. They emerged in the 1970s and 1980s as havens for representatives of wirehouses seeking alternatives to  mutual funds and other products. In those days, the independents were the disruptors.

Most of their reps wanted multiple solutions for their clients. They realized that while there was no single best fund for a client, they still could provide better answers than proprietary shops.

By the 1990s, the game was moving away from products toward advisory services, and the RIA model gained traction. This development spawned an entire ecosystem of service providers to help advisors offer clients an array of different solutions.

The most successful broker-dealers have been developing solutions to enable advisors to serve their clients more efficiently for several decades. But the DOL’s rule will inevitably prompt consolidation among both broker-dealers and their reps.

First « 1 2 » Next