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DOL Fiduciary Rule Change – That Ship Sailed Months Ago

DOL Fiduciary Rule Change – That Ship Sailed Months Ago

Friday’s bill on the House floor to delay the DOL fiduciary rule may result in a 24-month delay of pending arduous legislation. The largest providers of services to investors in our industry set sail for the April 10th destination months ago. In our blog just after the election we noted that anything less than immediate clear guidance would allow for structural and maybe irreversible changes to go forward in our industry. I am not aware of any large platform that has a ‘Plan B’ whereby a coordinated roll-back exists.

The deadlines outlined in the initial rule were so tight that the companies affected only had time to prepare a “plan to comply.” I believe the DOL’s rule will be delayed, but this will actually increase the expense of doing business for the industry.

Prior to the DOL rule, there was a time-worn way of doing business that the free market had roughed into the landscape like wagons ruts through a pass in the mountains. The large providers have now declared that route unsafe and moved to a different pass. There are, however, many smaller providers — and those unwilling to move off of their commission models — that will continue to use this time-honored path to sales albeit with greater compliance risk profile to their business.  We also have those who have adopted a technology-backed hybrid, whereby old and new methods are kept segregated based on strict eligibility rules to ensure compliance.

Our industry has fragmented its way of doing business, and the cost of support of three models will ultimately cost considerably more time and money.  Will the investor benefit in the long-term?  Potentially, but in the short term the additional models will drive complexity, increase the rate of change to support and increase the risk of the platforms supported.

My opinion is that the industry may have gotten their wish — a delay in the DOL rule — but the timing may have proven disastrous from a cost and complexity point of view.

 

Interested in learning more? Check out our webinar series featuring topics and solutions specific to the DOL Fiduciary Rule.

 

Whitfield Athey
Whitfield Athey is CEO of Delta Data Software. His role at Delta Data is focused on growth of the product base, satisfaction of clients and scalability of the organization.
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