Advisers Already Moving to Overcome DOL Fiduciary Rule Challenges

As a third-generation financial adviser currently working as the vice chairman of the individual investor group within D.A. Davidson, Andrew Crowell says he’s very confident the financial advisory industry will overcome the emerging challenges presented by the Department of Labor’s (DOL) fiduciary rule.

He’s not necessarily a big fan of the specific approach being taken by the new DOL rulemaking, worrying like many others that it could ultimately reduce choice for those with lower account balances. “But like any honest adviser should be,” Crowell says he is “very much in favor of any rulemaking that is going to increase transparency for our industry and reduce undisclosed conflicts of interest.”

During a recent conversation with PLANADVISER, Crowell explained his pedigree in the advisory industry, which is tied to the firm Crowell, Weedon & Co. His grandfather started that firm, passing it along to his father and then to Andrew himself, culminating in the 2013 merger of the firm with D.A. Davidson. Just this past March, Crowell and Weedon started formally using the D.A. Davidson brand, Crowell explains, “but we have maintained our strong family business character and our roots in Southern California.” 

Like all advisory firms with a history stretching back before the emergence of the modern 401(k), the combined D.A. Davidson firm has had to undergo a significant number of transformations in response to emerging market pressures, new technologies, regulatory changes, staff turnover and all the other factors that are constantly impacting advisory businesses large and small.  As vice chairman of the individual investor group, Crowell says the DOL’s fiduciary rule has been taking up a lot of his time and that of his colleagues.

“We’re doing the work right now of going through all of our business processes, documentation and contracts to assess the exact impact of the new fiduciary rule,” Crowell says. “I can say pretty confidently that a lot of firms are still out there doing the same thing at this stage. We are moving beyond the watch and wait phase, and personally, I’m very confident in our ability to continue serving our clients according to their best interest.” 

While there will be entire firms that struggle with compliance, Crowell says he actually feels more anxious for certain individual brokers who have focused more on product sales over client relationships. This is because, while firms can adjust the way they collect revenues and deploy their advisers on the ground, it is not necessarily as easy or seamless for the individual adviser to upend their customary way of doing business.

NEXT: Salesmen could be particularly hard hit 

“The group that will probably have the hardest time adjusting are those who have served their firms in dedicated sales roles, for example if you have been an annuity salesman for 15 or 20 years and working successfully off of commissions, that model will be more difficult,” Crowell explains. “I worry more for the individual brokers who have become accustomed to thinking about products first, rather than thinking about the client first and then considering product.”

While he feels it’s “unfortunate the DOL’s rulemaking seems likely to have a disproportionate impact on some advisers over others,” he also believes the regulator’s move is widely in keeping with the general momentum and progress of the advisory industry.

“Moving forward, we were already going to be focusing a lot more on mapping out the cost-versus-value equation for our clients, and not just those impacted directly by the Department of Labor ruling,” Crowell predicts. “We are going to be challenged to document and explain this equation and to be able to talk clearly and concisely about why our fees are justified.”

This will be “difficult but rewarding work,” Crowell predicts, “and it will result in a stronger advisory industry, as well as a stronger base of knowledge for our clients.” Other predictions from Crowell include the increasing use of robo-adviser technology, “which could be an answer to some of the worries about smaller accounts getting shut out of the market,” as well as a wider rethink about what financial advice can/should be.

“Our clients are already demanding holistic thinking in their advice that goes beyond stocks and bond allocations and looks at their real life financial needs, and they want their advice supported by robust and efficient technology,” Crowell says. “All of this is in keeping with the DOL’s new rulemaking, I believe, and in the next several years advisers are really going to have to step up to keep being successful.”