Skip navigation
US Department of Labor

Where Will You Be in a Post-DOL World?

While advisors may have dodged a bullet with a Department of Labor fiduciary rule that was less onerous than expected, it is not a non-event. Since its release in early April, senior leaders at major brokerage firms have been knee-deep in the 1,000-plus page rule, trying to interpret and come up with new policies and procedures to protect and corral their advisors.

While some firms figure out how they will be interpreting and enforcing the new standards, advisors can use this time to assess their business model, goals and relationship with their firm.

Here are some key outcomes advisors should consider:

1. It may be truer than ever that scale matters. To be sure, smaller broker/dealers are struggling to invest appropriately in the technology, infrastructure and platforms required as the regulatory environment changes. While advisors who work at boutique firms value how nimble their b/d can be and the access they have to senior leaders, many tell us that they are worried. Many are asking, “Is my broker/dealer resourced well enough to build comprehensive compliance programs around the rule’s requirements?”

As a result, we will likely see more transactions being done where large, scaled broker/dealers acquire their smaller counterparts.

2. The big question now is, when will the SEC decide to enact a uniform fiduciary standard? This certainly raises issues for advisors whose businesses are primarily commission-based. Will these advisors be even more relegated to dinosaur status, and will firms be interested in continuing to recruit them? We have seen a spike recently in the number of transaction-based advisors exploring options beyond their current firm. Almost without exception, these advisors want to move before it’s too late—before firms close their doors to non-fee-based folks.

3. There will likely be a greater migration to the fee-only RIA space. These advisors are already held to a fiduciary or best interest standard, and there will be fewer operational changes required of them. This could potentially create some dilution of RIAs’ marketing message, who now differentiate themselves by saying, “We are fiduciaries and our broker/dealer colleagues are not.” Even within the RIA world, we expect to see consolidation, as smaller firms struggle to comply with an ever-changing regulatory mandate.

4. The DOL rule provides a test case for how well-equipped a firm is to adapt to inevitable change. A general rule of business is that in order to create a sustainable enterprise, firms must continue to evolve and innovate; the DOL rule has served as the much-needed reminder of this to many firms that have become stagnant. Those firms that struggle to adapt to the new order will lose valuable human resources—advisors—to firms better equipped to manage change.

The rule in and of itself should not be the impetus for an advisor’s move, nor should it serve to fuel the inertia that often hampers the decision-making process. Instead, the decision to stay or go should be based solely on ensuring you are in the right place to serve your clients in the best way.

If you are an advisor who is already acting as a fiduciary, the changing regulatory environment should not determine the next phase of your business life. 

TAGS: Industry
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.