Expect the new fiduciary rule to boost recruiting opportunities for RIAs.

"I think the rule is absolutely going to have an impact," says Gabriel Garcia, managing director of BNY Mellon’s Pershing Advisor Solutions unit. "Some of the traditional barriers, such as recruiting and retention bonuses that financially blurred the benefits of being an RIA, are fading away."

Several recent announcements by wirehouse firms altering generous recruiting packages have begun to "lessen the impact" of compensation as a reason for advisers to not join RIAs, according to Garcia.

The fiduciary track record of RIAs means the new DoL rule is a "great opportunity" for independents, says Brock Moseley, founding partner of Miracle Mile Advisers.

"The transparency and simplicity of a fee-only model, where advisers are fiduciaries for client’s relationship in its entirety, make the independent model an increasingly compelling choice for those who are considering it,” Garcia says.

'THE FINAL NUDGE'
The fiduciary rule will be "the final nudge" for an adviser contemplating going independent to join an RIA, says Brock Moseley, founding partner of Los Angeles-based Miracle Mile Advisors.

"We interview a lot of people, and I get the sense that a lot of advisers who work for banks feel that even though the new rule is coming in, the banks are more interested in protecting themselves than the client," Moseley says.

The new rule is "a great opportunity" for RIAs because advisers will be attracted to firms that have been longstanding fiduciaries with a track record of being "more transparent and having a higher standard of putting the client's interests first," Moseley says.

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"It's the difference between being compliant with a fiduciary rule and having a culture as a fiduciary," says Grant Rawdin, CEO of Wescott Financial.

The fact that the fiduciary rule appears to level the field among wirehouses and advisory firms is indeed deceptive, agrees Grant Rawdin, CEO of Wescott Financial in Philadelphia.

COMPLIANCE VS. CULTURE
"It's the difference between being compliant with a fiduciary rule, and having a culture as a fiduciary," Rawdin says. "Complying with the rule begrudgingly is not enough."

Frank Pare, president of PF Wealth Management Group in Oakland, California, and the Financial Planning Association's president-elect, thinks the rule will boost overall adviser numbers in the long run.

"We need to bring more people into the profession and I think the fiduciary rule helps us get there because it will appeal to people who see financial planning as a higher calling," Pare says. "A fiduciary standard reinforces the notion of financial planning as a profession and will attract people who want to help others. And I think it will force more people to look more closely at the CFP designation."

ERISA BOOST
The new Department of Labor rule will particularly bolster the status of advisers who serve as retirement specialist ERISA 3(21) and 3(28) fiduciaries, says Bruce Harrington, a wealth management and retirement consultant for North Highland Consulting.

ERISA 3(21) advisers do not have discretion over a client's retirement assets but can advise on asset selection and monitor portfolios while ERISA 3(28) advisers can serve as investment managers with full discretion on retirement accounts.

"These fiduciaries have to act prudently, avoid conflict of interest and have loyalty the client, "Harrington says. "As more clients roll over their IRAs, the existence of a fiduciary rule enhances the credibility these specialists have had all along."

DISSENTING OPINION
One industry veteran, however, believes that broker-dealers will not lose as much recruiting ground to RIAs as is generally anticipated.

"Since the DoL ruling was announced, I expected that the rule would create an environment for IBD-affiliated advisers to jump into an RIA model," says Lori Hardwick, the former COO of Pershing and group president for adviser services at Envestnet.

"Many firms were requiring that all accounts that are held direct at fund companies be repapered to move to a full-service custodian," Hardwick notes. "Any time repapering is required, it opens the door for advisers to reevaluate their current situation, and if they aren't entirely happy, they often use that as a reason to switch to another BD or jump into a pure RIA model."

But Hardwick says she was surprised that she hasn't seen more advisers move from broker-dealers to RIAs.

"From my preview, most BD-affiliated advisors have stayed with their BD," she says. "Interestingly, I know of more RIAs that have actually sought to go back to their BD arrangements. I'm not exactly sure of their reasons, but my guess is that they are worried about the shifting sands of regulations and their ability to staff appropriately to stay on top of it all."

What's more, Hardwick adds, "the BDs, particularly the large ones, have become more adept in helping RIA-leaning advisers with tools, solutions and a broader array of fee-only product offerings so they operate as a sort of independent RIA within the BD framework."

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Charles Paikert

Charles Paikert

Charles Paikert is a senior editor at Financial Planning. Follow him on Twitter at @paikert.