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Regulation and Compliance > Federal Regulation > DOL

Impact of DOL fiduciary rule: small investors will lose access

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More than half (55 percent) of retail advisors believe they will have to drop or turn away small investors and half will stop handling small rollover business when the Department of Labor’s proposed fiduciary rule is implemented, according to a new LIMRA Secure Retirement Institute survey.

What is considered a small investor varies from advisor to advisor, but generally small investors have assets under $200,000. The LIMRA report reveals that 9 in 10 U.S. middle market households (with assets between $100k and $249K) have assets in a defined contribution plan or an IRA. And the majority of them expect to rely on those assets to fund their retirement.

Advisors believe the DOL fiduciary rule will have a significant impact. According to the survey, nearly half of advisors say the rule will discourage them from handling small rollover business and will require the advisors to spend more time to complete a rollover. However, 8 in 10 advisors believe the volume of rollover business will not be affected.

This suggests that advisors likely will focus their attention on larger rollover opportunities rather than help consumers with smaller account balances, who face the most financial risks in retirement.

Consistently, Institute research has found that consumers who work with an advisor to plan for retirement have better outcomes. The survey indicates that fewer middle market Americans will have access to professional advice.

The proposed rule will likely influence what products advisors will sell in the future. Once the rule is implemented, 45 percent of advisors say they will be more sensitive to product fees. And more than a third (37 percent) say they will use passively managed funds more often.

The study also reveals that more than 1 in 4 advisors expect to sell fewer annuities. And 1 in 6 say they would focus on selling annuities with non-qualified assets when the rule goes into effect. 

The Institute surveyed more than 1000 advisors who work primarily with individual investor in February and March 2016. Advisors included 523 broker-dealers in a firm registered with the SEC and a member of FINRA, 360 dually registered financial advisors who can act as both a registered investment advisor and a registered broker-dealer, and 121 registered investment advisors (RIAs).

See also:

Is this the calm before the fiduciary storm?

How to successfully transition to a fee-based practice

On eve of fiduciary rule, Financial Engines sees opportunity

How much time will be needed to comply with the DOL fiduciary rule?


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