Matt Matrisian, senior vice president for strategic initiatives at Concord, Calif.-based AssetMark, says that though most advisors support fiduciary regulations, many are confused by the overlapping regulations and paralyzed by uncertainty.
“It’s almost a no-brainer at this point that advisors need to go ahead and become conflict-free and document that they’re making sound recommendations based on their clients’ needs,” says Matrisian. “The DOL rule has been a catalyst for firms to move towards a fee-based model and become more efficient. Even if the DOL rule isn’t implemented, the world will continue to evolve, and taking steps towards becoming fiduciaries is increasingly important.”
Not to be outdone, the SEC may finally be looking toward a uniform fiduciary regulation for the entire financial services industry. At the beginning of June, SEC Chairman Jay Clayton requested comments on potential revisions of the DOL rule and “possible future actions” toward a fiduciary regulation of the SEC’s own.
In its comments to the SEC, the CFA Institute, which is responsible for the Chartered Financial Analyst credential, said that the SEC should begin by regulating the way industry professionals title themselves, arguing that brokers and their representatives should be referred to as “salespersons.”
Matrisian says that until the SEC acts, states present the best venue for additional fiduciary regulation.
“I think the states will potentially fall in line, especially if a larger state, like California, moves forward with legislation of its own,” says Matrisian. “I don’t think the industry will be able to operate under different fiduciary rules for very long, so the states will attempt to impose some sort of uniformity.”
In the absence of uniformity, commission and fee-based advisors will likely defer to the highest standard of care required by state regulations in an attempt to simplify their compliance requirements, says Matrisian.
As some Trump administration officials and members of Congress attempt to undo its fiduciary rule-making, the DOL is legally defending the regulation. In July, Labor Secretary Alexander Acosta urged the U.S. Court of Appeals for the Fifth Circuit to uphold every aspect of the rule except the private right of action.
“I think that the odds of the rule getting to January 1 intact are extremely thin,” says Schweiss. “For a variety of reasons, the date will probably slip back to give the department enough time to do its work and enough time for the marketplace to adjust to it.”
Schweiss says that the private right of action, as well as the rule’s best interest contract requirements, are the least likely to survive another delay. In the absence of a private right of action, it’s unclear how the DOL’s regulation would be enforced.
While some may take the regulations, laws and proposals on the table as proof of momentum toward more stringent standards of conduct, MacKillop believes that supporters of the fiduciary rule still face an uphill battle against an entrenched opposition.