Report pegs cost of DOL fiduciary rule at $3.9B for advisors

“This study shows that the DOL’s proposed fiduciary rule would be costly and burdensome to both the independent financial services industry and the investors that rely on the critical advice they receive,” said FSI President & CEO Dale Brown. “It also illustrates the unintended consequences the rule will have on hard-working Americans trying to save for retirement, particularly low and moderate-income investors who need advice the most.”

Among the report’s additional findings:

• The DOL has dramatically underestimated the compliance cost of the new rule and how difficult it will be for small firms to survive if it is implemented.

• The proposed rule will result in estimated startup costs ranging from $1.1 million to $16.3 million per firm, depending on firm size.

• Broker-dealers and investment advisors would be forced to either substantially change their current business models or navigate the challenging demands of a new “Best Interest Contract Exemption” (BICE).

• The rule will result in less access to advice from financial advisors for small and medium-sized investors. One unintended consequence: minority investors with small asset holdings will have a harder time seek advice from financial advisors.

• The proposed rule will result in industry consolidation that will likely force small broker-dealers out of business.

• An expanded potential for systemic risk in the retirement savings market as savers are increasingly pushed into the same set of standardized “low-cost” assets.

The report represents a close reading and critique of the Department’s Regulatory Impact Analysis, acknowledging comments published on the topic. Oxford Economics also conducted data gathering with the help of FSI, a professional organization representing independent financial services firms and independent financial advisors.

See an executive summary of the report here.