Advisers who have spent millions of dollars and untold hours preparing for the fiduciary rule’s implementation this April were dealt a blow by the Trump administration Friday.

Brokers and RIAs are now rethinking a year's worth of compliance efforts.

A halt to the rule is “tremendously misguided,” says Michael Joyce, the president of Joyce Payne Partners, an RIA in Richmond, Virginia.

(Bloomberg News)
(Bloomberg News)
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“It’s really hard to make an argument that you don’t want to do what’s in the best interest of financial consumers,” Joyce says. “Those who made the argument that it’s going to raise costs or limit choices, those are the ones with the entrenched incumbents, in many cases, who haven’t been working in the best interest of their clients.”

For others, the celebration begins.

"I think a sigh of relief is definitely being heard around the [brokerage] industry," says Tim Welsh, an industry consultant with Nexus Strategy.

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“Rule or no rule, investors want to work with an adviser who puts their interests first," says Skip Schweiss, managing director, TD Ameritrade Institutional.

All the firms and brokers who delayed preparations to comply with the fiduciary rule "are probably popping champagne right now," says Welsh, who imagines they are saying, "Our dream came true! Let's hope it goes away."

COMPETITIVE ADVANTAGE
Independent broker-dealers like Commonwealth Financial Network and LPL Financial, both of which announced major strategic moves to cut costs or drop commission lines of business in response to the rule, probably will be forced to reverse course, Welsh says.

For many, the White House’s announcement was not a surprise. But there are many questions that remain. “We all knew this was coming,” said James Gentry Beall, the president of Beall Financial Planning in Macon, Georgia.

Although Beall says the removal of the rule wasn’t unexpected, he expects that it would be a blow to the consumer and “give a competitive advantage for those firms that provide a fiduciary service.”

As far as for the rule’s future, “It’s too early to say,” Beall adds. “Let’s face it. We don’t know what’s coming from one day to the next.”

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"For us, we feel that stepping back and looking at it from the consumer's perspective is the right thing," said Infinex Financial Group CEO Steve Amarante.

Steve Amarante, CEO of third-party broker-dealer Infinex Financial Group, says his firm is excited about the administration’s efforts to delay the rule in hopes that there may be "right way without having to impose such punitive shackles on the industry."

Amarante noted that while the rule contained good ideas, it would ultimately hurt small investors. He adds that the rule should be under the purview of the SEC and FINRA, rather than the DoL.

"We feel that stepping back and looking at it from the consumer's perspective is the right thing," he says.

RIAs WOULD STILL BENEFIT
Robert Schmansky, founder and adviser at Clear Financial Advisors in Ann Arbor, Michigan, says postponing the rule without a clear path to fully eliminating the regulation would only add to the confusion.

“We have exemptions for what I feel are some of the worst in need of more regulation,” he said. “The result has been a distortion in the market where the giant firms can lower costs and provide a half measure of advice, while the large RIAs will increase or maintain costs to cover compliance. Small and mid-sized firms that served clients in the middle are and will continue to be forced out of the market.”

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Skip Schweiss, managing director at TD Ameritrade Institutional, said that if the rule was delayed, revised or repealed, RIAs would still benefit by raising awareness about that fiduciary distinction in a marketplace where investors are increasingly aware of that distinction.

“Rule or no rule, investors want to work with an adviser who puts their interests first," Schweiss said.

PRESSURE ON EMPLOYERS
Tom Reese, an investment adviser with Conrad Siegel Investment Advisors in Harrisburg, PA, says employers should not assume that their service providers shares fiduciary responsibility.

“With the fiduciary rule postponed, that burden will continue to fall on employers to make sure their retirement plan is in participants’ best interest,” Reese says. “There is even more pressure on employers to make sure that they are taking a proactive approach to meet their fiduciary responsibility.”

Michael Walsh, a spokesman for U.S. Bank, said the firm is “aware of the recent announcement” and is “committed to doing the right thing by our customers and will adhere to all rules and regulations.”

“Regardless of the rule’s future,” says Shelby George, senior vice president of adviser services at Manning & Napier, “our firm will continue to assess our internal processes, collateral and client resources as part of our ongoing commitment to lead the industry in fiduciary best practices.”

“We remain steadfast in that commitment regardless of what changes might be made to the DOL rule,” an RBC spokeswoman says. “Should the rule change in any way, we will ensure we are in compliance with any new requirements.”

A spokeswoman for Wells Fargo says the wirehouse will be “looking at the information when it becomes available.” A UBS spokesman said, "We welcome the administration's actions to reduce unnecessary or ineffective regulation and will continue to advocate for a single fiduciary standard that preserves client choice with the SEC taking the lead regulatory role and with a reasonable time frame for industry implementation."

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Andrew Shilling

Andrew Shilling

Andrew Shilling is an associate editor for Financial Planning, Bank Investment Consultant, On Wall Street and Money Management Executive. Follow him on Twitter at @AndrewWShilling.