In his opening speech at Commonwealth Financial Network’s national conference, CEO Wayne Bloom presented an amusing slide depicting a snoozing Bloom dreaming of the Dept. of Labor’s fiduciary rule. “I’ve been living the regulatory and DOL dream,” Bloom said in Austin, Texas, Thursday, but it was no dream.
In an interview Friday morning, Bloom said he’s been spending at least half his time for months on how the independent broker-dealer would respond to the DOL rule, which he called “one of the biggest obstacles” Commonwealth has ever faced.
The rule’s importance was directly related to the theme of the national conference, “Silver Linings; Transforming Obstacles Into Opportunities,” a trope reinforced by each Commonwealth speaker as well as outside keynoters ranging from Shark Tank’s Daymond John to newsman Dan Rather.
Last week, Commonwealth announced that as of the end of 2016 it would no longer offer commission-based products in retirement plans. In the firm’s statement announcing the change and in Bloom’s private and public comments during the conference, the decision to not avail itself of the Best Interest Contract Exemption was presented as a difficult but necessary step to not simply comply with this one regulatory change, but to position the company and its independent reps for long-term success.
The “mixed-up Dept. of Labor stew” of complying with BICE while facing “unlimited liability” should Commonwealth adopt the approach of continuing to offer commission-based products in retirement accounts led to the decision, Bloom said. It is “plaintiff’s attorneys,” he said in his speech, who are “the enforcement arm of this rule.”
Feedback from its own reps, especially its Advisors Council, proved “critical” in making the decision, Bloom said. And prompting much laughter, in his speech Bloom said that knowing Commonwealth reps’ penchant for providing feedback, “you certainly didn’t disappoint after we made the announcement.”
Unlike many in the industry who demonize the rule and its architects, Bloom called Labor Secretary Thomas Perez and Sen. Elizabeth Warren of Commonwealth’s home state of Massachusetts “decent people with good intentions” to protect retirement savers from conflicts of interest. Nevertheless, he said “the rule went too far; it’s the unintended consequences” of the fiduciary mandate that will hurt not only financial advisors but the very people the rule is intended to help.
While for Commonwealth itself, commissions on retirement products account for only 8% of the BD’s revenue, Bloom said the company is well aware that for some of its representatives those commissions represent a much bigger portion of their business. He also emphasized that Commonwealth will continue to support commission-based products outside of retirement plans.