The End of the Line By: Gabriel PotterMBA, AIFA® 2015.04.23

Last week, the Department of Labor moved forward with its process on expanding the fiduciary standard for brokers who work on retirement accounts.  This is good news for investors, who will benefit from advice that takes their best interests into account.  This is bad news for brokers, wirehouses, and financial advisors who have gotten a free pass to sell their clients “suitable” products with high commissions.

The rules proposed by the DOL are not in full effect.  Rather, this part of the process has moved to the “review” phase where financial industry professionals can comment and provide guidance on the proposed ruling.  You can bet that the lobbyists are going crazy trying to make sure that the new rules are softened to allow business to continue as usual.  However,  the administration is clearly hoping for a win by backing the new rules especially given the much vaunted but under delivering expansion of consumer protections under the Dodd-Frank act.  In fact, the review phase is already moving faster than expected (by a full month)  in an effort to steamroll the new rules into effect quickly.   

This may be the end of the line for business as usual, and it certainly represents a sea-change in the way brokers can attract new business if they cannot conform to the higher standard.  We expect to see unscrupulous brokers and advisers scrambling to adopt multiple lines of business – fiduciary and non-fiduciary – in an effort to convince their clients that they’ll maintain their best interest.  It’s going to be a hard sell.


Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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