Fiduciary Rule's Question for Some Advisers:Adapt or Flee?

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Sean Forbes

April 11 — Financial advisers who haven't been hewing to a fiduciary standard will have to make a big leap to adapt to the Department of Labor's new conflict-of-interest rules, and if they can't, they'll have to stop serving the retirement savings market, financial advisers said.

The complexity of the rule will make life difficult for such advisers, Charles Goldman, chief executive office and president of San Francisco-based AssetMark Inc., which provides consulting services for advisers, told Bloomberg BNA on April 8.

“My God, it’s a big, complex change,” Goldman said. Non-fiduciary advisers, such as those who work in the market “as a hobby,” are going to disappear over the next couple of years, because the rules are too complex, he said.

Goldman said other losers will be advisers who derive their profits from differential compensation—higher compensation for the sale of proprietary retirement products. “Now you have to somehow explain why if you’re going to make differential compensation, how that’s going to be in the customer's best interest,” he said.

The DOL on April 6 issued the final version of the rule (RIN 1210-AB32), which, all told, weighs in at more than 1,000 pages . The rule is intended to ensure that retirement savers get investment advice that's in their best interest.


Other advisers who have been working under a fiduciary standard don't find the new rule to be too complex, while recognizing that the rule will force a market transformation.

Christopher Jones, chief investment officer for Palo Alto, Calif.-based Financial Engines, told Bloomberg BNA on April 8 that the rule “will go a long ways toward catalyzing the industry to change,” while recognizing that it won't have a material impact on firms such as his, which deal primarily with large employers. Financial Engines provides online investment advice and retirement planning for employees at more than 140 of the Fortune 500 companies.

Although the DOL didn't rule out commission-based compensation for advisers, “our view is that in a perfect world, we don't have conflicts of interests,” Jones said. But “we don't live in that perfect world, and it will take us some time to get there.” Commission-based compensation arrangements are considered to be more susceptible to conflicts of interest than fee-based ones.

The Certified Financial Planner Board of Standards Inc., based in Washington, has its own experience with a debate over instituting a fiduciary standard, Marilyn Mohrman-Gillis, managing director, public policy and communications, told Bloomberg BNA on April 8. She also spoke on behalf of the Financial Planning Coalition, a collaboration of CFP Board, the Financial Planning Association and the National Association of Personal Financial Advisors.

To concerns that the DOL rule will result in a large drop in the number of advisers serving retirement investors or small employers, Mohrmann-Gillis said that the number of CFP professionals who are compensated on a fee basis has grown by 35 percent since 2007, to 74,000.

The DOL defines a small employer as one that has no more than $50 million in plan assets. To work with such plans, advisers can either take advantage of the best-interest contract exemption, under which commissions are allowed, or shift to a fee-only basis.

Mohrmann-Gillis she wasn't worried about a possible decline in the number of advisers working with small employers, because many CFP members already work with them, and will continue to do so.

To contact the reporter on this story: Sean Forbes in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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