Practice Management

Fiduciary RIAs and Investment Brokers Have Opposing Views

A new Cogent Reports analysis explores the strong difference of opinion about the DOL fiduciary rule visible across different advisory market segments. 

By John Manganaro editors@strategic-i.com | February 15, 2017

The latest publication in the Cogent Reports series from Market Strategies International suggests the future of the Department of Labor (DOL) fiduciary rule is “anything but certain.”

“We do know, however, that the majority of financial advisers have some concerns about the ruling, with six in 10 advisers (60%) overall favoring repeal,” the report explains.

Researchers find advisers employed by regional/national banks and those with supervising firms permitting use of commission-based accounts are the most likely to support repeal, at 82% and 72% opposed to the implementation of the rulemaking, respectively.

“In contrast, registered investment advisers, most of whom are predominantly fee-based and already consider themselves fiduciaries, are more likely to oppose repeal (45%) than support it (29%),” the Cogent Reports analysis finds. “The decision to support repeal is not an easy one for firms. Many companies are far down the road in preparation and communication with clients, while others have indicated they will make fiduciary status a point of competitive differentiation.”

The analysis concludes that firms “going back on that messaging” could be perceived as “not being on clients’ side after all … Hoping clients don’t question the impact of repeal could be very problematic.”

“In fact, our initial research with affluent investors regarding the ruling indicates that nearly half would only work with a fiduciary going forward while over one-third prefer it,” researchers warn. “Regardless of the future of the ruling, this shift in preference will create opportunities for advisors acting as fiduciaries. As a result, we’re likely to see a continued shift toward lower-fee investment products.”

More information on the report is available here