In this two-part series, we ask independent financial advisors how they view the Department of Labor’s fiduciary rule with a view to its potential demise. In this second part, we hear from FAs who think the rule is worth preserving. Click here to read part one: Indie FAs cynical about the DOL rule’s chances.
Many in the wealth and retirement industry see the Department of Labor’s new fiduciary rule as a dead letter thanks to Donald Trump’s win in the recent presidential election.
After all, a top item on the president-elect’s to-do list is “a requirement that for every new federal regulation, two existing regulations must be eliminated,” according to the Trump election campaign.
In a recent FA-IQ poll, 35% of readers predict the rule — which calls for all advisors, including securities brokers and insurance agents, to put their retirement clients’ interests before their own — will be repealed in fairly short order. The same percentage expects it to be watered down under Trump.
But others — including 31% of those who took part in this publication’s thumbnail survey — believe there’s no going back on the DOL rule.
Along these lines, asset manager SEI is warning advisors against holding out too much hope for a delay in implementation. As far as it’s concerned, the DOL rule will take effect in April, just as scheduled under soon-to-be former President Barack Obama.
And even if the rule goes south under Trump, a spokeswoman for Oaks, Pa.-based SEI says advice firms should prepare now for a compliance overhaul because — in its view — “a new regulation would need to be proposed in order to repeal” what’s on the books now.
Meanwhile Kevin Couper, an FA with Sontag Advisory in New York, can’t fathom “why Trump would want to dismantle” a rule that “promotes transparency, avoids conflicts of interest and holds advisors accountable for their recommendations.”
Adds Couper, whose employer manages $4.2 billion: “Annuities, poor fund selections and excessive fees” — things banned or curtailed by the rule — “should have no part in a retirement plan.”
Jason Archambault, managing member of the Providence, R.I.-based fee-only firm SKWealth Management also thinks scrapping “the DOL rule would be bad for consumers.”
Putting it plainly, “There are many investors who do not get investment advice in their own best interests and this rule aims to protect them,” says Archambault, whose firm manages $211 million. In this context, he asks, “How could putting a client’s interest ahead of your own be a bad thing?”
As an RIA owner, Archambault and his colleagues have long thought their firm’s status as a fiduciary practice “a competitive advantage” over non-fiduciary rivals. But for the sake of consumers, and for the economic well-being of all retirement savers, he says “we would welcome this rule to apply to all” advisors.
John Gugle, chief investment officer of Alpha Financial Advisors in Charlotte, N.C., is another FA with fingers crossed the DOL rule stays intact and on schedule.
“If we have firmly established the fact that American investors have paid a heavy price in the form of lower retirement savings thanks to expensive products, sales gimmicks, and investment advice that is not in their best interests, why would we want to return to a system where some advisors deliver advice that puts clients’ interests first and others deliver advice where the advisor’s interests are best served?” Gugle wants to know.
But Gugle, whose firm manages $135 million, thinks there’s hope a level playing field and higher standards of care prevail under Trump.
“When candidate Trump talked about ‘draining the swamp’ in Washington, he very well could have been talking about draining the swamp in the financial advisory business,” he says. “The same issues — taking advantage of unwitting customers, putting your own interests ahead of the public’s best interests, shady compensation structures, etc. — that corrupt Washington, corrupt the financial service industry.”
The advice business needs “greater transparency and a higher standard of care if we are going to make America great again for investors and retirees,” says Gugle.
As an advisor who charges his clients retainers rather than fees on assets under management, fledgling RIA owner Neil Maxwell of Parker, Colo., supposes he’s among the advisors “considered to have the least amount of change to implement in order to comply with the DOL.”
So if the rule comes, goes or shoots sideways, he says it’s unlikely to have too much impact on him in terms of day-to-day operations.
Bigger picture, though, Maxwell thinks the DOL rule’s demise would be “sad” because “people deserve transparency and they also deserve real advice and not just a sales rep.”
But then Maxwell also wonders if the new administration can ever sweep the DOL initiative all the way under the rug. “The rule has done one major thing I don’t believe Trump will be able to repeal,” he says. “Case law.”
As the rule stands now, Maxwell says, clients will be able to sue their firms for providing damaging advice.
“This is a huge step forward,” he concludes. “It will put our rules into the court system and increase accountability for all of us.”