The notion that the so-called “blind squirrels” – advisors who don’t know anything about retirement plans – would flee the retirement plan business due to the constraints of the fiduciary regulation seems almost intuitive. But that’s not how NAPA Net readers see it.
There have been many thoughtful, insightful, reasoned notions about the impact of the fiduciary rule, and some that teeter on wild speculation, including the notion that it would decrease the number of “blind squirrel” advisors – and that it would have no effect. Asked their opinion, nearly 15% of this week’s respondents said the potential impact of the fiduciary regulation has not had any impact at all, another 40% say it has had only some slight downward impact, and a substantial minority (29%) said there were fewer due to changes in B/D compensation practices. However, just over 1 in 10 said there were a “lot fewer,” while the rest “hadn’t noticed.”
As for how it might impact the number once the fiduciary regulation was in place, about 11% said it would have no impact, 36% said it would have a slight downward impact, 28% attributed that reduction to changes in B/D compensation structures, and nearly 25% said it there would be a lot fewer. All in all, a shift toward the “lot” from “no” and “slight” impacts. However, one reader cautioned that the final result would “depend on how the regulations are monitored,” while another noted that “there will be more ‘partnering,’ but less overall.”
Outlandish Predictions
Asked to weigh in on the most outlandish prediction about the fiduciary regulation (thus far):
- 39% said it won’t impact the amount/cost of advice offered
- 19% said we didn’t need the fiduciary regulation (or something like it) to protect IRA investors
- 15% said the current system costs savers $17 billion
- 12% said it won’t cost savers/investors more
- 9% said (some) advisors are akin to a colony of termites feeding off Americans’ savings
- 4% said it would “run off” blind squirrels
- 2% said it would hurt small investors
Other Comments
We got a number of reader comments to this week’s topic. Here’s a sampling:
“Many thought the Fee Disclosure rules would help weed out ‘blind squirrel’ advisors. What I found working with prospects is that the ‘blind squirrel’ advisors didn't understand the Fee Disclosure rules and, therefore, didn’t comply. I fear we may see some of the same response with the Fiduciary Rule.”
“Broker-dealers and other compliance officials with find some way to limit the services that these blind squirrels provide or leverage it with another group to satisfy the regulations. The whole situation will end up more complicated and costly than before for too many plans and participants.”
“Large platform providers are rushing to offer ‘one-pill’ solutions to nominally meet the Fiduciary obligations they perceive, making those unqualified or even inept relatively insulated from losing business or cleaning up their servicing deficiencies.”
“This regulation is long overdue. It was nearly final under the Bush administration, pulled back and reworked by the Obama administration, nearly final again and now being reworked again by the Trump administration. I've been in this business for over 28 years and seen many examples of the garbage brokers sell to plans just to get the commissions. That includes mutual funds with high expenses, churning stocks and bonds in brokerage accounts, high priced annuities inside a qualified plan, risky private placements that paid up to 20% commissions, antique coins, limited partnerships that ended up being fraudulent. The common denominator is that the broker or insurance agent made more by selling this garbage. Forcing the investment community to act in the best interest of plans and IRA holders by making them a fiduciary will be a huge help to those saving for retirement.”
“To think that we can have a fiduciary standard, based on how it is written today, without an impact to cost and availability of quality care for all is the most outrageous, uninformed of all thoughts. I welcome a great standard of care, just not this one as currently written. Industry should design for this, not politicians and agency staffers with no real-world experience.”
“Blind squirrels will be supported by systems/services/offerings that will correctly redefine their value proposition.”
“I think there are going to be crooks in every industry, regardless of regulation. I also think too much regulation causes otherwise good guys to become bad guys by accident. Although it would be nice if all investment advice were purely altruistic, no amount of regulation is going to make that happen.”
Thanks to everyone who participated in our weekly NAPA Net reader poll!
