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Raymond James’ Bohannon on the Demise of the ‘Accidental’ Broker Dealer

Bo Bohannon, Manager of Retirement Plans Consulting at Raymond James, thinks that the pending DOL conflict of interest rules will have a major impact on BDs, especially what he calls the “accidental” DC BDs and the advisors within those firms.

“Accidental” BDs usually include those that do not have at least one person dedicated to the DC business, which whittles the number to 50 if you include specialty groups. Within that group of 50 (listed on NAPA Net here), there are varying levels of support. Even for those BDs with significant support, they cannot treat all advisors — ranging from Elite to Emerging — the same.

“The DOL rule will force BDs to lock down the providers they work with and the fee schedules establishing guardrails,” opines Bohannon. “Specialists will have opportunities to act as 3(21) and 3(38) fiduciaries. Specialists need generalists to foster smaller plans, and the industry needs to have every BD do the business to provide broad coverage. But specialists are not necessarily important to every BD.”

Though Bohannon believes that managing DC plans under an RIA is a “get out of jail free card” for advisors under the proposed DOL rule, the issue of level comp for IRA rollovers is still a problem. “Specialists may be forced out of ‘accidental’ BDs more interested in protecting the IRA business,” he believes.

“408(b)(2) lowered fees to some degree and made more people realize that they are acting as a plan fiduciary,” notes Bohannon. “The DOL rule will push certain advisors to put their plan business into an RIA while pushing some out of the business entirely.”