Skip to main content

You are here

Advertisement

DOL Rule: End for Some, Beginning for Others

Change is coming as a result of the DOL fiduciary regulation, with many broker-dealers expecting some of their advisors to retire while others think smaller BDs may not even be able to survive due to the cost of complying. Distribution of annuities and product simplification may also be accelerated, according to some experts, while others blame the lack of guidance by BDs on a fear of attrition among the ranks.

According to a LIMRA survey of BDs, 54% believe that some of their advisors will retire rather than sell their practices, while many advisors will stop providing advice to smaller IRAs. Most BDs expect to use the Best Interest Contract Exemption (BICE) or PT 84-24 for retirement products, with one-third expecting to use the BIC for all retail products. More litigation and changing of comp structures are the two biggest impacts predicted, along with higher costs to comply and report — which will drive some smaller firms out of the business altogether.

Some experts believe that annuities are too complicated anyway, and manufacturers will use the DOL rule as an excuse to simplify products while streamlining distribution with more fee-based investments — although commissions are expected to survive.

Are BDs holding off announcing how they will deal with the rule, especially around commission levels for annuities, until the last minute for fear of attrition among their ranks? Though that's possible, it’s more likely that firms are trying to figure out the business implications of how they comply with the rule for themselves, their advisors and the advisors’ clients before they act.

A Natixis survey of 300 advisors indicates that 27% are expected to sell, merge or retire because of the increasing cost of compliance as well as unrealistic demands of clients.

So is the DOL rule a disaster waiting to happen or an opportunity? Baron Rothschild is credited with advising investors to buy property when there’s blood on the street. April 10, 2017 could be the start of a very bloody period.

Opinions expressed are those of the author, and do not necessarily reflect the views of NAPA or its members.

Advertisement