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Credit Union Advisors Lead the Pack in Fiduciary Rule Readiness: Study

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Credit union financial advisors may be better positioned than others to adapt to the Department of Labor’s controversial fiduciary standard for qualified retirement accounts, according to a study released by Kehrer Bielan Research & Consulting on Wednesday.

The new rules will push advisers working in financial institutions to move from primarily transaction business to all advisory business. Congress passed a joint resolution that would have disapproved of the rules, but President Obama vetoed the resolution and Congress failed to override it.

The company’s annual benchmarking study found that credit unions are far ahead of others in making the transition.

“The average credit union in our annual benchmarking survey generates one-quarter of its overall revenue from advisory fees – a 19% greater share than the average in banks that own their broker-dealer,” said Tim Kehrer, co-author of the study and a senior research analyst at KBR&C, a Chapel Hill, N.C.-based consulting firm.

Advisory revenue as a share of total revenue increased 39% in credit unions year over year, the study of 994 credit unions found. The company also conducted an in-depth survey of 46 credit unions.

The company reported that average gross investment services revenue per financial adviser was $438,917 in 2014 – essentially flat from the year before. However, for bank broker-dealers, average revenue per adviser dropped 6%.

Meanwhile, the fiduciary rule is being challenged in federal court. The National Association for Fixed Annuities is seeking a preliminary injunction, contending that the DOL had exceeded its authority in issuing the rule, which is scheduled to become operational in April 2017.

A similar lawsuit was filed by such groups as the Securities Industry and Financial Markets Association and the U.S. Chamber of Commerce.

The Credit Union National Association has expressed support for legislation to change the rule, saying it would harm low- and mid-income families seeking investment options.

“The DOL’s overly broad definition of a ‘fiduciary’ could negatively affect credit unions who offer investment services through arrangements with third-party brokers by subjecting them to overly burdensome compliance hurdles for providing the opportunity for services, despite minimal involvement,” CUNA President/CEO Jim Nussle said in a February letter to members of Congress.


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