A panel of experts urged advisors affiliated with the AIG Advisor Group to read up and speak up on the Department of Labor’s proposed fiduciary rule, despite the fact that the official regulatory comment period is over.
“No one disputes the intentions, but they do [dispute] the details,” said Dale Brown, president and CEO of the Financial Services Institute, speaking before 2,000 advisors and 1,000 other guests at the AIG Advisor Group’s ConnectED conference on Tuesday in San Antonio.
Brown described advisors’ and broker-dealers’ main complaint about the proposed rule: It is based on the premise that there should be no conflicts of interest versus the view of some securities professionals that such conflicts can be “successfully managed.”
AIG Advisor Group President and CEO Erica McGinnis asked Brown to highlight the timeline of the proposal: “Is it moving at a lightning pace?”
“We are waiting to see the final proposal, which we expect to see … in the spring of next year, and we know we will see it before January 2017, when President Obama leaves office,” the FSI CEO explained.
The wider AIG organization, which has some 30,000 employees, “has been reaching out to Congress and has sent 11,000 messages to the DOL” about the proposal, according to Richard Loconte, deputy head and associate general counsel of federal government affairs for AIG.
“AIG shares the administration’s goal of working in the best interests of the client,” Loconte explained. “But we see the ambiguous and uncertain [aspects] of the proposal and the problematic environment it creates for advisors, who could not provide products and services, such as those tied to lifetime income, that clients need.”
Several members of the panel addressed the practicalities of the expected regulatory shift.
“If you have clients in IRA accounts, you will be affected,” said Joe Terry, chief supervision officer of the AIG Advisor Group, which includes close to 6,000 affiliated independent advisors and four broker-dealers (FSC Securities, Royal Alliance Associates, SagePoint Financial and Woodbury Financial Services).
It is possible that advisors will need to ask clients to sign contracts in order to affirm that the advisors and clients have discussed the clients’ best interest and specific product details, for instance.
“Can you image having to ask someone, right after [a spouse has died] to sign a contract around certain advice?” Terry asked the audience. “Talk about bad timing.”
“If you are an RIA, do not think your compliance with RIA rules is going to give you a pass,” Brown said. “And those in a predominately advisor-focused environment have a lot to understand when it comes to the impact this could have on their business.”
In addition, the new rules could strongly discourage advisors from keeping small client accounts on their books, once they’ve done the cost-benefit analysis on this business.
“It’s sad,” explained Terry, “and these are just the accounts that need investor protection, too.”
In light of such complexities, the panel members urged advisors to get better informed and begin speaking to clients about what may lie ahead.
“We are working with our advisors to make sure the issue remains front and center,” Loconte said, “and we’re trying to stay optimistic.”
—Check out AIG Advisor Group Is ‘Island of Stability’ in BD Space: Exec on ThinkAdvisor.