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Why Most BDs Say They Want to Keep the DOL Rule

By Alex Padalka October 2, 2017

A majority of broker-dealers believe the Department of Labor’s fiduciary rule should be kept, but most also think it should be scaled back, according to a recent report by the International Financial Law Review.

Sixty-two percent of broker-dealers think the rule should be retained, according to a survey and interviews of broker-dealers conducted in September by IFLR and the law firm Morrison & Foerster. Nonetheless, the survey also found 62% of broker-dealers welcome a roll-back of the rule, which purports to force retirement account advisors to put clients’ interests first and went into partial effect in June.

Among those who don’t think a roll-back is practicable, 15% say it’s simply too late to change course as the industry has gone too far already implementing the rule, according to the survey. None of the respondents thought that the rule should stay as written simply because their clients now expect them to comply with a fiduciary rule, according to the survey, in which IFLR didn’t disclose the number of respondents.

As for how exactly to roll back the DOL’s fiduciary rule, most advisors put their trust in the SEC: 56% say the regulator should work with the Labor Department to come up with a uniform standard that would apply to all accounts and not just retirement ones, according to the survey.

Eleven percent say the DOL rule should be dumped entirely for a fresh start and 33% believe the DOL rule is already the de facto standard for the securities industry, the survey found.

IFLR also found that only 18% of broker-dealers have changed how they handle smaller accounts, which critics of the DOL rule have said would be squeezed by the rule’s compliance requirements. Among broker-dealers who have had to make changes, all of them are closing smaller accounts while raising account minimums, according to the survey.


None of the respondents are putting smaller accounts on a level-fee basis or pushing them into robo-advisor platforms, the survey found. What’s more, 64% of respondents haven’t revamped their internal compensation arrangements as a result of the rule, ILFR found. But 27% are making compensation level across product classes and 9% are cutting or eliminating back-end bonuses tied to volume, according to the survey.