Fiduciary Rule-Driven Practice Changes Coming Into Focus
As an advocacy group for retirement plan service providers
and investment managers, the SPARK Institute has been at the center of the
debate over the Department of Labor’s final fiduciary rule.
A recent survey of retirement plan services providers
conducted by the SPARK Institute identifies some of the ways providers are planning
to modify their business practices to work within the new fiduciary regulatory structure.
Tim Rouse, executive director of SPARK, explains the poll
focused on SPARK Institute members, garnering more than 100 detailed responses
from some of the leading retirement plan services firms. Unsurprisingly, many
say they are still in the process of analyzing the regulations, while others are vocally worried about the potential impacts of the fiduciary rule,
even with a significant amount of pull-back and compromise in the final rule compared with the
previous proposed versions.
Among SPARK member firms, 14% indicated they believe they would
become a fiduciary for the first time under the new regulations, while 23%
would continue to be a fiduciary, and 30% said they planned to continue under a non-fiduciary status.
“However, 34% of firms indicated that they are unsure which
direction to take,” Rouse warns. “While about half of the members don’t plan to
make major strategic business changes, the other half have already decided to
fundamentally change their business model, or are still considering whether to
do so. This level of change will likely take years to play out fully in the market.”
NEXT: Uncertainty
remains
According to SPARK's polling, the responses also indicate “a fair
degree of uncertainty yet to be answered and decisions to be made.”
For example, almost 80% of firms surveyed said they are “still
evaluating risks and requirements of the regulations.” At the same time, 60%
indicated that key parts of the regulation are still not clear; 75% are
watching to see how their peers are interpreting and addressing the regulation;
and 49% are looking for guidance from industry organizations.
According to Cynthia Hayes, president of Oculus Partners and
co-author of the survey, “these responses indicate that the industry is still
in a mode of absorbing the final language of this massive new regulation, and
is going to inevitably rely on strong support from organizations like SPARK,
and further guidance from the regulators. Even with all the changes the DOL has
made to make the regulation more practical, there is still a massive amount of
language to study, and already providers can see significant change required in
business practice governance and oversight.”
Respondents also indicated that they are thinking about more
than simple compliance, according to SPARK. A strong majority (80%) indicate
that they “want to understand how the regulation will change the competitive
landscape,” while 60% “want to understand the impact on the advisers with whom
they work.” Less than half (40%) are “actively looking at new product ideas as
a result of the regulation.”