According to an article by InvestmentNews, delaying the implementation of a Department of Labor (DOL) investment advice rule would likely benefit small advisory firms working to comply with the regulation. Benefits and executive compensation partner Brad Campbell describes the potential impact of the rule on registered investment advisors (RIAs).
The publication reported that 10 financial trade associations wrote to the DOL and requested more time to prepare for the agency’s fiduciary rule for retirement accounts. The rule is scheduled to go into effect on Dec. 20. Campbell said extra breathing room would be important for small investment advisory firms. They need more time to adjust their policies and procedures and train staff for the fiduciary rule, he continued.
“A lot of smaller RIAs don’t understand the magnitude of the work necessary to comply by December,” explained Campbell, former head of the Employee Benefits Security Administration (EBSA) during the George W. Bush administration. “It’s entirely possible a lot of RIAs won’t be in full compliance by December despite their best efforts.”
The other challenge facing RIAs is that they assume they’re in the clear on a fiduciary rule because they charge flat fees for advice rather than receiving variable compensation from third parties, Campbell noted. But they will need to rely on the DOL rule’s exemption because recommending a rollover will create a new revenue stream for them.
“A lot of RIAs think of themselves as the fiduciary ‘good guys,’” Campbell said. However, according to the publication, everyone can be a “bad guy” under the DOL rule. “Whether your compensation is a flat fee or a commission, it’s still going to be a prohibited transaction for rollover recommendations,” Campbell added.