If the DOL is successful in its efforts to impose a broader definition of a plan fiduciary, the business model of the non-fiduciary advisor being compensated by a plan provider is at risk of becoming obsolete. In a recent article originally published in Research magazine, Pentegra’s Pete Swisher refers to 12b-1 compensated advisors in a fiduciary world as a “case study of a potential prohibited transaction” that would “require some legal gerrymandering” to justify.
A more likely result: advisors moving to a fee-based model, as Swisher notes.
But what if non-fiduciary advisors do disappear? How will we ensure that employers and participants continue to have access to high-quality, personalized financial advice? Who or what is going to pick up the slack? A government solution like the president’s myRA plan? Low-cost online programs?
The employer-based retirement system is still the best solution, Swisher asserts. The trick, says Martha Tejera of Tejera & Associates, will be to focus on finding a compensation model that is generous to keep advisors in the game while minimizing conflicts of interest: “To me, the whole shell game of ‘blame the fiduciary’ is a legal construct that will enrich lawyers and only make the system ever more costly.”
Don’t bet against the creative financial services industry finding a solution that works for everyone — but don’t expect a smooth ride either, the article concludes. What’s your take? Start a discussion in the comment box below.
