With the Department of Labor’s (DOL) fiduciary rule in place, it’s natural to ask how it will affect financial services companies and advisors’ businesses once it’s fully implemented. How much commission revenue might the industry lose and can fees replace that loss? Could the rule cause financial advisors to leave the business?
The short answer is that reliable data to measure the rule’s impact accurately won’t be available it’s been fully implemented. That lack of solid information led companies approached as sources for this article to decline sharing their internal projections. Similarly, industry analysts are waiting for post-implementation financial results.
The U.K. Experience
For a possible preview of upcoming changes, John Anderson, director, practice management solutions with SEI Advisor Network in Oaks, Pennsylvania, cites a May 2016 SEI report that highlights the United Kingdom and Australia’s recent transitions to fiduciary status. Those countries’ products and distribution channels differ from their U.S. counterparts but their experiences could offer insight into what U.S. companies and advisors might encounter.
The U.K. began implementing fiduciary regulations through its Retail Distribution Review (RDR) in January 2013, after a six-year development period. According to a June 2014 report from the London-based Association of Professional Financial Advisers (APFA), the regulation culled advisors’ ranks. There were 40,566 advisors in January 2011; by January 2014 that number had fallen to 31,220. In the bank and building society sectors, the drop was approximately 60 percent. When advisory firm owners were asked about their plans for recruiting new staff, 60 percent reported no plans to hire new advisors or paraplanners within the next two years.