BlackRock and Vanguard urge delay in Department of Labor's fiduciary rule

The fund management giants say investor confusion is reason to wait

Mar 27, 2017 @ 2:25 pm

By InvestmentNews

Citing investor confusion and the "unreasonably high costs and operational burdens" it would impose on the financial services industry, the nation's two largest investment managers have called on the Department of Labor to delay the scheduled implementation date of its fiduciary rule.

In letters to the Department in response to requests for comments on a plan to delay the rule for 60 days beyond April 10, BlackRock asked for a stay of an unspecific length of time, while Vanguard said the rollout should be pushed back at least a year.

It would be "unrealistic" to expect the DOL to carry out a full review of the rule in 60 days, said Vanguard Chief Executive Bill McNabb, whose firm manages $4 trillion in investor assets. While he said his firm supports the view that advisers providing financial advice should be held to a fiduciary standard, Mr. McNabb said "we want regulations as far-reaching as the [fiduciary] rule to be well-crafted and thoughtfully implemented to limit investor confusion, disruption and cost."

Barbara Novick, vice-chair of BlackRock, said the current applicability date "would impose unreasonably high costs and operation burdens on the financial services industry."

BlackRock oversees $5.1 trillion in assets.

A story in the Financial Times that quoted the two fund executives also cited a 2016 study from consulting firm AT Kearney predicting that implementing the DOL regulation could cost the brokerage industry $11 billion in revenues through 2020.

As the largest managers of low-cost passive mutual funds and ETFs, BlackRock and Vanguard are expected to be among the chief beneficiaries of a rule that would require advisers to make the cost of asset management fees a significant consideration in their recommendations.

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