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Commission-based clients don’t want fee-only accounts

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Most clients investing through commission-based accounts would consider changing firms if forced into a fee-only model, according to J.D. Power’s latest survey.

Although fee-only clients report they are “generally more satisfied with what they pay their firm,” commission-based clients reject the notion that the Department of Labor’s fiduciary rule would benefit them, according to the survey released last week.
Almost 60% of full-service, commission-based investors said they would “probably” or “definitely” take their business elsewhere if their firm’s compliance with the rule meant switching into fee-only retirement plans, the consulting and research firm’s study found.

The Trump administration appears likely to make the point moot with a possible delay or outright repeal of the fiduciary rule. Yet its uncertain fate, the looming changes at many firms and the growth of robo advice have made for what the report calls “fiduciary roulette.”

“This significant money-in-motion event will undoubtedly create winners and losers among industry firms, with the outcomes determined by how effectively they can communicate and deliver on the unique value proposition they provide to those segments of the market in which they choose to compete,” J.D. Power wealth management practice director Mike Foy wrote in a blog post about the study.

The firm quizzed over 1,000 investors last month in an effort, according to Foy’s post, to shed light on the business ramifications of the rule. Foy writes in an email that the 449 investors who said they pay at least some commissions comprised the sampling for the findings on fee- and commission-based plans.

Some 19% of the group said they “definitely will not” stay with their firms under a mandatory fee-only plan, while 40% said they “probably will not” remain under the change. Only 8% said they “definitely will” stay through the shift, while 33% said they “probably will” stay.

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