51% of advisers see DOL fiduciary rule benefiting business

Just over half of the financial advisers polled a week after the Labor Department released its fiduciary rule think it will be good for business as it will level the playing field for retirement account advice.

Asset manager Pioneer Investments surveyed 861 financial advisers in all 50 states who work for wirehouses, broker-dealers, independent advisory firms and companies with an insurance-based business model. The poll was taken live during Pioneer’s April 13 webinar, “The Fiduciary Regulation is Here… Are You Ready?”

(Related: Coverage of the DOL fiduciary rule from every angle)

The new rule, which requires advisers to put clients’ best interests first when assisting with their retirement accounts, may change the way many brokers do business as they’ll now have to justify commissions they collect for investments they recommend. That may be enough to accelerate the brokerage industry’s shift toward a fee-based model, charging investors based on the amount of assets they hold instead of the commissions they receive on transactions.

“It requires extra work,” said Blaine Aikin, executive chairman at fi360 Inc., who was a panelist on Pioneer’s webinar. “You have to be able demonstrate that the clients’ best interests are being served.”

Advisers view the regulation more favorably than when it was proposed a year ago, as many worried they’d have to stop selling their firms’ proprietary investment products due to the potential for conflicts of interest. Only 27% of advisers polled by Pioneer in April 2015 felt the fiduciary rule would benefit their business while 38% indicated it would hurt profitability, according to Pioneer’s findings.

The final version, released April 6, clarified that commissions could still be collected from proprietary products, but they must be disclosed under the regulation’s best interest contract exemption, or BICE.

“It’s a behavioral adjustment for everybody,” said Mark Spina, executive vice president and head of U.S. intermediary distribution at Pioneer Investments.

Pioneer’s poll showed that 61% of advisers already use a “level compensation” model based on fixed fees, and won’t need to rely on BICE routinely for revenue that may vary with each transaction made for clients. Twenty percent said they would switch to a level compensation model to avoid BICE.

Asked how the fiduciary rule will affect their rollover business for individual retirement accounts, or IRAs, 49% of advisers expected little to no impact and 23% indicated a moderate to high negative impact.

As brokers and their firms cope with implementing a highly prescriptive and complex set of new rules, the basic premise remains simple: do right by your clients.

(Fiduciary perspective: Tweaks to final rule help ease implementation, retain core fiduciary principles)

“It’s good for their business,” said Mr. Spina. Being a fiduciary “raises their profile.”

Advisers were less sanguine about the outlook for investors.

Pioneer’s poll found that 47% believe the new rule will hurt investors by raising costs and limiting the availability of advice for small and middle-income investors. Just 37% believe the rule would help them due to fewer conflicts of interest, while 10% saw it as a non-event for investors.

The findings may reflect a short-term disruption as firms adjust to higher compliance costs, according to Mr. Aikin, who said the new rule should ultimately reduce fees for investors as advisers compete for their business on a more level playing field.

Pioneer said that 8% of advisers polled expected broker-dealers to integrate “a digital robo platform” to support small or potentially orphaned accounts.

“The marketplace is highly adaptable,” Mr. Aikin said.