No, DOL Fiduciary Rule Not Driving Advisors Away From Firms: Brian Hamburger

A bigger issue for financial advisory firm than the pending DOL fiduciary rule: finding competent advisors and other personnel: Brian Hamburger

The market for breakaway advisors “has never been more ripe,” but that’s not due to the Department of Labor’s fiduciary proposal, says Brian Hamburger, managing director of MarketCounsel, a consulting firm that helps those advisors set up their own RIA shops.

The rule, which could be finalized and issued as early as next month, is changing perceptions and increasing uncertainty in the advisor market, but it’s not the reason for advisors to leave a firm or remain there, says Hamburger.

Just as many advisors say the rule is a catalyst for departure as say that it’s a reason to stay put in their jobs, says Hamburger.

“It’s never that people are staying or going because of some impending regulatory decision because at the end of the day it’s not going to really disrupt their business,” says Hamburger. “They’re still going to carry on. They’re going to make minor modifications to their practice, but the decision to stay or go  shouldn’t be hanging in the balance.”

Perhaps not, but Norm Champ, the former director of the Securities and Exchange Commission’s Division of Investment Management, told a Washington summit Thursday that the rule will cause brokers to exit the business.

Whether or not advisors and brokers leave firms, changes will be required once the rule is finalized. One primary change will apply to the sale of commission-based products such as variable annuities and mutual funds with 12b-1 fees for retirement accounts. (The DOL rule applies only to retirement accounts.)

The proposed rule requires that advisors act in the best interest of their clients, which would exclude the sale of many commission-based products unless the advisor and the client acknowledge any conflict of interest by signing a contract known as the best interest contract exemption. Exactly which products could still be sold with a BICE and which could not won’t be known until the final rule is out.

But even if there were no DOL proposal, some advisors may still feel uncomfortable about the pressure to sell their firm’s proprietary products, and feel they should be leaving anyway, says Hamburger. “This regulation is just the weather of the day.”

A bigger issue for advisors than the pending DOL rule is “finding the right people to fill different roles within their firms,” says Hamburger. “Recruiting is far and away a much bigger problem than anyone is writing about now. There’s a real competency gap.” He says firms are having a difficult time filling all sorts of jobs, including positions for advisors, support staffers and management. “It’s complicated,” says Hamburger. “The skill set that’s required to fill a role in this day and age is a lot more complex than what it used to be.”

And that will likely get even more complicated once the Department of Labor’s final fiduciary rule is issued.

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