Will the pending DOL fiduciary rule hamper financial services firms’ ability to calm nervous investors during market volatility like we experienced last month?
As reported in The Wall Street Journal (subscription required), Fidelity claims that they will be restricted if the DOL rule is implemented as currently proposed.
During the 1,000-point drop on Aug. 24, Fidelity said that calls by investors increased 50%. While Fidelity was able to calm most callers by advising them to stay the course, Fidelity is concerned that it would have a hard time even giving that guidance without some kind of special contract — and that their ability to provide quick, personal assistance especially during market volatility will be in jeopardy if the DOL rule is promulgated in its current form.
Other Impacts?
With all the discussions about the effect that the rule might have on advisors, sometimes lost in the discussion is the effect it could have on financial firms — for example, how it might play out with record keepers, many of which have tremendous influence on which funds are placed on the menu, especially when dealing with emerging plan advisors, or as a way to keep overall plan costs lower by including proprietary or high revenue sharing funds on the menu.
Similarly, firms that solicit rollovers probably would have to be more careful in providing advice, not only on which investments should be selected but also whether an investor would be better off rolling assets out of his or her plan if the current version of the DOL rule becomes effective.
