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NAIFA survey: Fiduciary rule likely to reduce retirement advice

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A survey by the National Association of Insurance and Financial Advisors of its members finds that many advisors believe the Department of Labor’s fiduciary rule affecting retirement products and services will damage their ability to serve their clients, particularly those who are lower- or middle-income clients.

According to the survey of 1,167 NAIFA members, more than 62 percent say the DOL rule will probably force them to stop serving some or all of their clients. An additional 11 percent say they are unsure whether the rule would force them to stop serving clients.

Related: Not ready to become a DOL-compliant FI? Go partner with one 

The DOL rule is likely to spark an exodus from the market: 16 percent of survey respondents say they will no longer provide retirement plan products or services to individual or business clients.

Lower- and middle-income clients could be particularly hard hit by implementation of the rule. Nearly a quarter of the advisors (24.2 percent) say they will lose all of their lower- and middle-income clients, while 41.3 percent say they will lose some. An additional 17 percent say that they do not yet know how the rule will affect their ability to serve clients who are not wealthy.

“The DOL rule has a strong potential to be a very bad deal for consumers who are not wealthy, but who are trying to do the right thing for their families by preparing for the future,” says NAIFA President-elect Paul Dougherty. “Lower- and middle-income workers want and would benefit from the help of a professional advisor as they prepare for retirement, but they may find that help hard to come by under the DOL rule.”

Compliance costs to have ‘negative effect’ on business

Advisors express a strong belief that complying with the rule will increase their costs of doing business. Nearly half (49.5 percent) expect their compliance costs to go up significantly. And an additional 29 percent expect costs to rise modestly, with 11 percent saying they are not sure.

Nearly all of the advisors foresee the rule having an impact on their ability to serve clients. The effects will be entirely negative, according to 56.7 percent of respondents, while 27.3 percent say the effects would be mixed. Only 3 percent said the effects are likely to be entirely positive.

“NAIFA members are dedicated to serving lower- and middle-income clients,” Dougherty adds. “But much of this is out of the advisors’ hands. Several financial institutions have already said they will no longer provide retirement investment products because of DOL rule’s compliance costs. Others may follow suit or restrict their business to wealthier clients.”

Advisors are working to understand and prepare to implement the rule, with the vast majority indicating that they have at least some understanding of the impact the rule will have on their business. Only 3.8 percent say they have “no understanding,” and 12 percent say they have “complete understanding.”

Related: DOL fiduciary rule: Disruption or opportunity?

Nearly one in ten advisors (9.8 percent) say they are fully prepared to implement business procedures and practices to comply with the rule. An additional 40.2 percent say they are “somewhat prepared,” while 24.6 percent say they are “somewhat unprepared” and 25.4 percent say they are “unprepared.”

Related: IMOs take on enhanced sales role under the new DOL rule

“NAIFA continues to pursue legislative, regulatory and legal avenues to mitigate the harm the DOL rule will cause consumers and advisors,” says NAIFA CEO Kevin Mayeux. “We are also helping our members prepare to best serve their clients moving forward. At our current Performance+Purpose conference in Las Vegas, we have several workshops that provide practical education on specific aspects of the rule. Our comprehensive, four-hour Skill Builders workshop on the DOL rule helps advisors understand the rule’s requirements and restrictions, develop strategies to implement the rule within their practices, and become compliant while best serving the needs of their clients.”

The online survey, conducted Aug. 31-Sept. 6, comprised 1,167 NAIFA members who have provided retirement plan products or services to individuals or businesses in the past 12 months.


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