Data & Research March 14, 2016

Advisers Flinch at Oncoming Fiduciary Rule

About three-quarters of advisers in a Fidelity survey are anxious the DOL fiduciary advice rule will affect how they do business.
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Adviser awareness of the investment advice regulation proposed by the Department of Labor (DOL) is industry-wide, with four out of five at least somewhat aware of the proposal and 73% concerned the rule will have a negative impact on how they do business. 

The top concerns about the rule are: it will increase the time spent on compliance tasks, raise the cost of business and affect adviser compensation.   

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According to Tom Corra, chief operating officer of Fidelity clearing and custody solutions, a number of advisory firms are considering re-evaluating their service models, the products they recommend and the investors they serve in response to the pending DOL fiduciary rule. The changes are especially concerning to broker/dealers, but they are not the only ones. “Many registered investment advisers who are already held to a fiduciary standard under the Investment Adviser Act are also seeing the rule as challenging, particularly its impact on their rollover and IRA business,” Corra says.

According to the survey, 53% of advisers say their firms plan to wait until the DOL rule is finalized before undertaking any substantial action. 

In addition to the research, Fidelity has drawn up a list of “Six Ways to Help Prepare for the Proposed DOL Investment Advice Rule and Capturing Opportunities Created by the Proposed DOL Investment Advice Rule.” The resource outlines steps to consider so advisers can begin preparing for the changes.  

NEXT: Six steps to consider
  1. Develop a fact base for your existing retirement business: Understand the full scope of your firm’s retirement business.
  2. Review business practices and procedures: Consider carefully reviewing business practices and procedures in several key areas, including education, rollovers and referrals.
  3. Understand the potential financial impact of the proposed rules: consider high-level scenario planning to better understand the potential revenue impact and technology and compliance costs to implement provisions of the rule.
  4. Explore potential new business models and segmentation strategies: The rule includes a number of approaches to compliance.  Firms may consider different models for different segments of their clients and different types of adviser. 
  5. Identify changes to infrastructure and support that are likely to be essential for rule implementation: Firms may look to invest in technology and/or additional talent to ensure compliance.  Investing in improved workflow may also help reduce the rule s new costs and time requirements.
  6. Consult with internal and external experts as you develop your plans: Given the complexity of the proposed rule, firms should engage legal, tax and compliance experts to help them fully understand its implications and ensure that their plans comply with the new regulations.

The Expectations of Upcoming DOL Ruling study was an online, blind survey fielded between January 5 and January 12. Participants included 485 advisers who manage client assets either individually or as a team, and work primarily with individual investors. Adviser firm types included 22 banks, 140 independent broker/dealers, 69 insurance companies, 108 regional broker-dealers, 63 RIAs, and 83 wirehouses.

More information about the survey is on Fidelity’s website.

Data & Research March 14, 2016

‘How Much Have Americans Saved?’

More than half of Americans said in a survey they have less than $10,000 saved for retirement.
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A long list of competing financial priorities—credit card or student loan debt, saving for a child’s education or low wages—are cited as obstacles to saving for retirement, says Cameron Huddleston, Life + Money columnist for GOBankingRates.

However, some people do manage to save, despite these challenges. Retirement savings correlates with a saver’s life stage, according to a new study from GOBankingRates. For young people just starting their careers, simply saving at all could be a sufficient goal, while those nearing retirement are likely to want to have at least a few hundred thousand in their retirement accounts.

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Those likeliest to have no retirement savings at all are Millennials, who are 40% more likely than Gen Xers and 50% more likely than Baby Boomers to have no savings. Gen Xers are making a significant effort to save: 48% have stashed away more than $10,000, and about a quarter of those savers—27%—have saved $100,000 or more.

The top balances can be found in the accounts of Baby Boomers and seniors, who are 85% more likely than Gen Xers to have $300,000 in retirement accounts, and 4.6 times more likely than Millennials to have saved this amount

Of the 42% of Millennials indicating they have no retirement savings, it’s the younger members (ages 18 to 24) who have not started, at 52%. Of older Millennials, ages 25 to 34, the percentage of non-savers drops back to a more reasonable 36%. Younger Millennials most commonly have “less than $10,000” (30%) and $10,000 to $49,000 (11%).

NEXT: Gen X struggles

Just more than half of Gen Xers (52%) still have less than $10,000 saved for retirement. This generation was hit especially hard by the financial crisis of 2008/2009, which cost them 45% of their net wealth, GOBankingRates.com says. Younger Gen Xers are falling farther behind than their older counterparts: most younger members have balances of less than $50,000. Older Gen Xers (ages 45 to 54) are clearly making an effort, with an impressive 40% having balances of $50,000 or more.

As respondents get older, the gap between savers and non-savers widens. A larger portion of those age 55 and older report having high-balance retirement funds, but a significant subgroup still has little to no retirement assets. About 3 in 10 of respondents in this age group have no savings. About one-quarter (26%) report savings balances of less than $50,000. More than half (54%) have balances far behind typical retirement fund benchmarks for their age group.

GOBankingRates surveyed three age groups of approximately 1,500 respondents each: ages 18 to 34; ages 35 to 54; and age 55 and older. Respondents were asked, “By your best estimate, how much money do you have saved for retirement?”

More information about the survey is at GOBankingRates’ website.

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