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Industry Spotlight > Broker Dealers

BD Stocks Feel Bite as DOL Fiduciary Deadline Nears

By Janet Levaux

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Stocks of broker-dealers have been weakening since Labor Secretary Alexander Acosta said earlier this week that the government is sticking with the new fiduciary rule’s June 9 compliance date.

Though the department is seeking public input on the rule, the financial markets see the sweeping regulatory changes as going forward, at least in the short term.

LPL Financial, for instance, moved down about 0.8% on Wednesday, while Primerica weakened 3%; both had declined Tuesday. Stifel Financial fell about 0.7%, and Raymond James declined 0.6% two days after Acosta made his position clear in an op-ed in Monday’s The Wall Street Journal.

“While the headline is a negative for the life insurers, brokers, and asset managers, we do not think investors should overreact to the news,” said KBW analysts Brian Gardner and Michael Michaud in a note.

It’s possible that future changes to the Labor Department rule could benefit life insurers, broker-dealers and others, they add.

“Sec. Acosta wrote that the fiduciary rule is being considered as part of the administration’s review of financial regulations, and we believe the administration thinks that the 2016 rule is too restrictive, so we expect future modification that expand some of the prohibited transaction exemptions including the best interest contract exemption,” the analysts said.

Furthermore, they expect the Trump administration to explore modifications that would reduce paperwork and compliance requirements associated with DOL, as well as provisions within it that permit class action lawsuits.

Their bottom line on how brokers and investors should view this week’s developments?

“The DOL announcement is in line with our general expectations that chances for a further delay in the fiduciary rule were diminishing but that further modifications to the rule remain on the table,” the KBW analysts explained.

— Check out Sticking to DOL Fiduciary Deadline Is ‘Right Move,’ Says fi360’s Aikin on ThinkAdvisor.

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