DOL rule may be history, but a fiduciary standard still in the works

The latest body blow to the Department of Labor’s fiduciary rule continues to divide the financial advice industry.

“It’s a shame we keep having these conversations when we should just put our foot down, because there shouldn’t be an argument about whether it’s good to put the clients’ interests first,” said Elliot Weissbluth, chief executive of HighTower Advisors.

Reacting to Thursday’s ruling by the Fifth Circuit Court of Appeals, which vacated the DOL rule, Mr. Weissbluth called out those that have opposed the fiduciary rule.

“This is not a complicated argument,” he said. “Those people who are complicating it are doing so because they have an economic interest in not putting the client’s interest first.”

The flipside of that argument is that “freedom” might be coming back to the financial advice space, according to Frank Congemi, president and chief executive of Benefactor Financial, an affiliate of broker-dealer Securities America.

“I’m glad the court shut down the DOL rule and now there’s no damn fiduciary rule,” he said. “Look at all the time and money we wasted on this, and look at the confusion it has caused the consumer.”

Mr. Congemi compared the DOL rule to “communism, where you get one model and one system.”

“The whole system is just wrong,” he added. “There’s not much independence left for independent advisers if we’re all pushed into the same model.”

While some ardent opponents of the rule might be celebrating the latest twist in the DOL rule saga, most of the fans and critics of the rule are convinced the fiduciary debate is just getting started.

“I think it’s a good thing that this version of the rule has been put to bed, but I don’t think this is the end of fiduciary standards,” said Pat Sweeny, principal and co-founder of Symmetry Partners.

“While well-intended, the DOL rule was poorly written and executed,” he added. “It will take some time, but I do think a fiduciary rule will be created. It won’t be stopped.”

Rita Robbins, founder of Affiliated Advisors, an affiliate of the Royal Alliance brokerage firm, also was not a fan of “best practices being legally mandated,” but believes it will take some kind of rule to clean up the industry.

“I personally believe, unfortunately, we’re in an industry where unless somebody is legally forced to do something there will be advisers who won’t do it,” she said.

Meanwhile, Ms. Robbins added that “placing additional burdens on advisers and firms to comply with DOL rules has already created mountains of additional paperwork, which clearly is burdensome overkill.”

Even critics of the way the DOL rule was created and executed believe that there’s a growing interest in fa iduciary standard among consumers, and that the SEC will likely address the issue.

“It became clear the wrong governing body was in charge of this,” said David Lyon, chief executive of Oranj, a digital advice platform. “The SEC is definitely going to be addressing what I think the DOL was trying to address.”

The idea of the Securities and Exchange Commission stepping in to take the handoff from the DOL is where some proponents of stricter fiduciary standards are now focused.

“I was surprised by the court ruling because having an adviser work in clients’ best interests seems like the obvious best choice,” said Brian Menickella, managing partner at The Beacon Group of Companies.

“But the war has already been won, because the decision has already been made by the public,” he added. “The first question clients are asking now is whether we’re a fiduciary, and the SEC is already weighing in.”

Mark Travis, president and chief investment officer at Intrepid Capital, describes himself as “conceptually a fan of the DOL rule, but I’ve been through a full range of emotions.”

“I originally felt it might correct some of the abuses in the broker-dealer world where we see a lot of high-commission products in retirement plans, but what I didn’t foresee was the effect it would have in investor choice,” he said. “I think we’re better off without the rule because a lot of firms have already moved toward some type of implementation, and hopefully the industry will self-correct. I just hope the industry doesn’t go back to selling annuities in retirement accounts.”