The National Association of Personal Financial Advisors will continue to advocate for full implementation of the Department of Labor fiduciary rule, even as the department delays part of the rule, says Geoffrey Brown, NAPFA’s CEO.
Although the Trump administration has been less than enthusiastic about the fiduciary rule, which requires broker-dealers and advisors who handle retirement plans to put the best interests of their clients first, Scott Beaudin, the new chair of the NAPFA’s board of directors, says the parts of the rule that have already been implemented would be difficult to undo.
In a wide-ranging interview with Financial Advisor, Brown and Beaudin offered their perspectives on a variety of subjects. Of the new regulations, Brown says both the DOL and the Securities and Exchange Commission’s efforts to make the financial services profession more accountable are steps in the right direction.
Both say they have faith the DOL rule and any proposals from the SEC will not be in conflict but will be coordinated. Most of the DOL rule has gone into effect already, although firms are still gearing up to meet the new higher standards. Other parts of the rule are expected to be delayed until at least July 1, 2019.
Opponents of the rule say it is burdensome and confusing, but Beaudin says firms seem to be working through any confusion.
Brown adds, “Firms seem to be on track to comply. Opponents are sending mixed messages. It can’t be that burdensome if they are managing to comply.”
NAPFA has been a strong supporter of the fiduciary rule and supports fee-only advisors. The industry sees fee-only practices as better able to meet the new requirements, which are designed to avoid conflicts of interest.
Opponents of the rule argue that requiring more compliance will drive smaller firms out of business or force them to consolidate. Brown counters that consolidations were already taking place in the industry before the DOL rule was a reality.
“There are opportunities of scale that firms are taking advantage of that are making it advantageous to consolidate,” Brown says. In addition, firms are including consolidations as part of succession planning as the advisor population ages and firms are passed to the next generation.
“There will continue to be a variety of sizes of firms,” adds Beaudin. “Consumers will have a choice of the types of firms they want to handle their finances. Sixty-five percent of firms are still solo practitioners, and that has not changed much over the years.”