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BD Advisors React to Appeals Court Striking Down the DOL Rule

By Crucial Clips     March 28, 2018
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Mar. 22, 2018 

RITA RAAGAS DE RAMOS, FA-IQ: The Fifth Circuit Court of Appeals has ordered the Department of Labor to vacate the fiduciary rule.

Meanwhile, the Securities and Exchange Commission is forging ahead with its own best interest standard.

FA-IQ asked the Financial Times Top 400 broker-dealer advisors for their views on the latest developments surrounding fiduciary standards.

JAMES MCLAUGHLIN, SVP, INVESTMENTS, PRINCETON WEALTH ADVISORS (RAYMOND JAMES): I think it’s great that the SEC will be tackling this issue, I think, to have one fiduciary standard for all investors, not just retirement plan investors. It makes the most sense.

We, as one might imagine, had to get ready for the DOL change, so we just went through a total revamping of our fee schedule for every client, because we had charged differently for different asset classes. And because we couldn’t have two fee schedules within Raymond James, we had to convert everybody to one fee schedule. So I think we’ve bit the bullet and we’ve done a lot of work, and I don’t think we’ll change anything at this point in time.

LOUIS CANNATARO, FOUNDER AND PARTNER, CANNATARO PARK AVENUE FINANCIAL (NORTHWESTERN MUTUAL): From the beginning, we’ve always run our practice acting as a fiduciary looking to do everything in the best interest of our clients. So even when it first came out, there really wasn’t much for us to do differently. Now, we do have the compliance department, and there may be new forms or way that we handle things, but that’s all secondary. What we actually do day-to-day is basically staying the same. For us, it’s almost that the rest of the playing field has to come up to our level.

We are now, and our compliance department, are acting as if the DOL is going through, and we are moving in the direction that, if it goes through, we’re right in line. If it doesn’t, once again, we’re ahead of the game.

RICHARD KELTON, PARTNER, THE KELTON FINANCIAL GROUP (NORTHWESTERN MUTUAL): It’s kind of ironic that the industry has to be mandated to act in the best interest of clients. You wouldn’t think that would have to be in any practice. It’s not going to affect the way we interact with our clients. Before we were mandated or needed to become fiduciaries, we acted in the best interest of our clients.

We try to physically stand inside our clients’ shoes. If they had our expertise and we had their set of circumstances, I would expect them to come up with the same recommendations that we do. I don’t think it’s going to affect our practice in any way, positively or negatively.

CHRISTOPHER COOKE, PARTNER AND SENIOR INSTITUTIONAL CONSULTANT, COOKE FINANCIAL GROUP (NOYES): Speaking as a former law student, and I guess an attorney who never practiced, I would love to be a part of these court hearings and hear what different judges and different attorneys for each side have to say. But I think that the ruling that vacated the DOL rule was a split decision. By definition, we have some disagreement on what is happening.

At the end of the day, I’m not sure it matters. And the reason I say I’m not sure it matters is the heart and the guts of the Department of Labor rule is to do the right thing for the client. We have always believed in our practice in doing the best thing for the client. I believe over many, many years, that’s why we’ve been successful and grown. I believe the top advisors in the country broadly all do the right thing for the clients. The heart of this rule is going to be implemented because it’s the right thing to do.

Now, how it gets implemented is what we’re debating today. Will it be the Supreme Court reversing this Appeals Court, will it be a new rule from the SEC, or will it just be the evolution of the business? But the heart of the DOL rule is coming, and for those of us who’ve practiced, or have been in business and practiced for many years, it’s a good thing. It’s what we should be doing.