Proceed or stand down: Should advisers continue preparing for the DOL fiduciary rule post Trump?

Many brokers and other financial firms have already changed compensation and other policies to align with the regulation

Nov 11, 2016 @ 1:21 pm

By Mark Schoeff Jr.

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Advisory firms on their way to complying with a Labor Department investment advice regulation are debating how many resources they should continue to allocate to a rule whose fate is now uncertain under President-elect Donald Trump.

While many experts and advisers say firms should continue on that path toward compliance, others are in a “wait-and-see” mode.

Mr. Trump's upset win unleashed a torrent of speculation about the viability of the rule, which requires advisers to retirement accounts to act in the best interests of their clients.

The measure has drawn strong criticism from the financial industry, which asserts that it is too complex and costly. The election of a president who may be sympathetic to their argument gives opponents hope that it will be delayed or scrapped.

But the final measure was released in April, became effective in June and has an initial implementation deadline of next April.

Advisory firms have to forge ahead with compliance because the calendar doesn't give them the luxury of waiting to see what happens next, according to Denise Valentine, a senior analyst at Aite Group.

“You have to keep going because there was already too little time to get done what you need to do by the deadline,” Ms. Valentine said. “You would be in a deplorable state by April [if you stop]. It's just too complex.”

A financial technology firm that is helping its clients meet the requirements of the rule encourages them to maintain momentum.

“We're of the mindset to stay the course,” said Angela Pecoraro, chief operating officer at Advicent, a financial planning software provider. “The firms we do business with have invested a lot of time, money and resources into preparing for different compliance deadlines.”

Not everyone is taking the full-steam-ahead approach. Brian Hamburger, president of MarketCounsel, a compliance consulting firm, asserts that Mr. Trump's election threatens the survival of the rule.

“There's no prize for being the first to comply,” Mr. Hamburger said. “What we thought to be true 24 hours ago has all changed. Unless they have a special case, I would not sink resources into compliance until the smoke begins to clear and we have greater clarity as to what we can reasonably expect.”

But many brokers and other financial firms have already changed compensation and other policies to align with the rule.

“It's going to be like turning the Titanic around in the Panama Canal,” said John Nowicki, president of LCM Capital Management. “There's no way of going back.”

The Financial Services Institute, which represents independent broker-dealers who are likely to be the most affected by the rule, is telling its members to proceed with implementation.

“The April 10 date is set until a court, Congress or a new administration changes it,” said Dale Brown, FSI president and chief executive. “Everyone needs to stay focused on getting ready for that until it's clear it's going to change.”

In fact, changing course might mean that a lot of money is wasted.

“It would be more costly for them to go back to square one and start all over,” said Brian Menickella, managing partner of the Beacon Group of Companies.

Potential disruption to a regulation by a presidential transition is nothing new, Ms. Pecoraro said.

“We have seen these things happen before,” she said. “Firms just need to be agile in their thinking and be prepared to make small adjustments in their plans should a change be made by the new administration.”

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