DOL Fiduciary RFI Process Extends a Decade of Uncertainty

Rob Cirrotti, managing director and head of retirement and investment solutions at Pershing LLC, is leading the company’s efforts to help registered investment advisers (RIAs) and broker/dealers comply with the Department of Labor’s expanding fiduciary rule.

The DOL rulemaking remains an incredibly divisive and unpredictable topic, Cirrotti says, despite literally a decade of debate and discussion among regulators and providers striving to find a workable middle ground.  

“We have been spending a lot of energy as a firm on making sure our advisory clients have what they need as it relates to fiduciary rule compliance,” he tells PLANADVISER. “What we have clearly heard from clients is that, for many of them, this is going to be a pretty dramatic change in how they run their business and do their compliance efforts, especially if the rulemaking is fully implemented on such an aggressive schedule. It’s no surprise, then, to see that they are very closely watching the latest, possibly final, request for information process opened up by the DOL under President Trump on this issue.”

Cirrotti has found “a pretty wide range of views on the matter” within the book of business.

“Part of that stems from the fact that we serve both RIAs and the broker/dealers,” he explains. “The B/Ds range across many different sizes and segments, and on the RIA side that is true as well. So there are different perspectives on the rule. I would say that the B/D community is naturally more concerned about getting more time to comply with the impacts of the rule—it’s more dramatic for them given their business models.”

The independent RIA community Pershing serves is more prepared, generally.

“Both on the RIA side and the B/D side, our clients are all making good faith efforts to deal with the uncertainty surrounding this issue and get to a place where they feel good about compliance under the Employee Retirement Income Security Act (ERISA),” Cirrotti adds. “It is still far from settled, we believe, what the final requirements will be and what the path of compliance will ultimately look like. It is hard to understand right now exactly what the environment will look like from the strategic and tactical perspective.”

At a very high level the RIAs are more capable of embracing the flat fee-for-service model that seems to be favored by the DOL, he says. Many of them are already working in that capacity for some or all of their clients.

“Certain RIAs already feel very passionate and committed to upholding the fiduciary standard as part of their core value proposition. Interestingly, however, some RIA firms are actually against the new fiduciary requirements because they feel their current willingness to take on fiduciary status sets them apart in the eyes of clients,” Cirrotti explains. “So once again, opinions continue to vary on the issue.”

Cirrotti concludes that the uncertainty surrounding the fiduciary rule’s future will continue for quite some time. It is still unclear how DOL will ultimate act, he notes, and there is indication that the Securities and Exchange Commission may soon get involved in the fiduciary reform effort and attempt to create harmonization across the defined contribution plan and individual retirement account advisory markets in a different way.

“Frankly the industry seems to be suffering some DOL fatigue,” he says. “The reality of what clients really want to be focused on is the dialog around how to transform their retirement advisory business for the future. The DOL rule is part of that, but it has to be a wider conversation about the role of in-person advice versus robo-advice. How do we groom the next generation of advisers and brokers? In what way scan we improve our operating models to maximize efficiency and leverage scalable technology and big data? How do we best facilitate oversight of the business the advisers in the field are doing?”