Former Vanguard Chairman and CEO Jack Brennan said Tuesday that he’s “very bullish” on the Department of Labor fiduciary rule’s outcome.
“Whatever happens with DOL, it served its purpose by getting best interest into the public, the press,” Brennan, chairman of the Financial Industry Regulatory Authortiy Board of Governors, said during a question-and-answer session with Robert Cook, FINRA’s CEO, during the self-regulator’s annual conference in Washington. “My own view is that firms should keep on that [best-interest] track because it’s going to be the way business is done — whether it is going to be June 9 or June 9, 2022.”
Brennan, now Vanguard’s chairman emeritus and the former chairman of the Investment Company Institute, also said the new share classes that have cropped up to help firms comply with the rule “will stay in place.”
Said Brennan: “I think it’s been an unbelievable tribute to the industry, to see how product platforms adapted” to the fiduciary rule. “We’ll continue to see the evolution of share classes, in the context of the best-interest idea.”
“Once a good trend hits, it doesn’t reverse,” he added. “It’s just going to be a lower-cost world for the consumer. Share classes with be adaptive to the best-interest world.”
35 Years in the Industry — What’s Changed?
The types of products and the distribution method for those products have “changed so radically,” Brennan said. “When I started in this business, you had two choices to buy a mutual fund,” but “now, as a consumer, I have an incredible variety of choice, and that’s a good thing.”
Cook agreed, stating, “We’ve come so far in terms of investor choice.”
Regulation, however, is “far more complex,” Brennan said.
“When you look back, even almost pre-Sarbanes-Oxley, it was pretty discreet — the SEC had its lane, FINRA had its lane, the bank regulators had their lane, and there wasn’t that overlap. Then we go to Graham-Leach-Bliley and the repeal of Glass-Steagall and the global financial crisis and [regulation] becomes far more complex. That’s good and bad,” Brennan said. “We brought the complexity on ourselves, in some ways, but legislation helped.”
Regulation “has changed almost as much as the consumer experience. It’s become harder for people in the audience to do their jobs. It makes this audience’s role and firm higher profile, and the chance to make a mistake much higher than it used to be,” he added.