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DOL Rule or Not, Financial Industry is Changing

DOL Rule Whether the DOL rule is delayed, which is likely for 60 days, or even scrapped, it has made an indelible mark on the financial services industry which will not and probably cannot be undone. A fee based investment firm in Colorado outlines four of these changes.

  1. Products and fees offered by major brokerage firms and banks to clients, especially in retirement accounts, have been restructured with many eliminating commission products and others limiting the number of options. These firms include Bank of America/Merrill Lynch, Morgan Stanley, Wells Fargo, LPL, Raymond James, JP Morgan and Edward Jones most of which will not roll back the clocks even if the DOL rule is defeated. High commissioned annuities in IRAs are likely a thing of the past while the 401k and 403b industry is moving away from commissions, or compensation that varies by the product sold, and revenue sharing which is like commissions for record keepers.
  2. Investors and plan sponsors are waking up. It’s almost impossible to find a defined contribution (DC) plan sponsor not aware of the DOL fiduciary rule with many, for the first time, beginning to understand what it means to be a fiduciary even if the DOL rule does not directly change their status.
  3. There are more resources than ever to educate plan sponsors and investors whether in-person or online also fueling the robo advice industry.
  4. More advisors are moving to a fee based, conflict free world especially in the DC world. Though some emerging advisors and blind squirrels will exit the market either on their own or because their broker dealer is forcing them out, there are many others seeing an opportunity who will focus on DC plans. There are 250,000 advisors who touch a 401k or 403b plan yet only 25,000 are minimally qualified with at least $25 million and 5 or more plans under management and 2500 elite advisors with $250 million and 10 plans. Yet there are 1 million DC plans and growing with state initiatives mandating coverage.

So DOL rule or not, the financial industry seeking redemption after the egregious actions of some during the Great Recession, is adapting to a more conflict free fee based fiduciary world where commissioned brokers selling high priced annuities will become the exception, a position that fee based advisors were in a decade ago.

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein