A panel at the Envestnet Advisor Summit on Thursday addressed the concerns advisors have with the Department of Labor’s conflict of interest rule released April 6.
“Advocacy is a critical component of business success,” Clarke Camper, senior vice president for government relations for Capital Group, the parent of American Funds, said during the panel. He noted that his mantra in meetings with regulators on the rule was choice. “We need to preserve choice for investors and we need to preserve choice for advisors” on what business model they want to use.
He said his clients have raised issues with the rule’s potential to drive more firms to the RIA model.
“I think it’s going to accelerate macro trends toward an advisory model,” he said.
He said Capital Group’s fastest growing business is the fee-based group.
Secondly, grandfather provisions in the rule mean pre-existing assets won’t be covered until the effective date of the rule. Grandfathered assets present several challenges, such as how to segregate grandfathered and new accounts and contributions, but Clarke said they are “eminently solvable.”
Brian Hamburger, founder, president and CEO of MarketCounsel, said investor confusion is one of the most significant issues the rule addresses, although “it may not be the best way to address it,” he said.
Investors don’t understand the distinctions between a broker and advisor, or fiduciary and suitability standards, he said.
The DOL has indicated it’s willing to tweak the rule in the coming months as it receives industry feedback, Hamburger said.
“What this rule really does is create another standard of care” for different kinds of accounts, he said.
Pam Krueger, founder and CEO of WealthRamp, agreed that consumers are confused “and now they’re befuddled.”