PROPOSED FIDUCIARY RULE BRINGS CHALLENGES, BUT ALSO OPPORTUNITIES, CONSULTANTS SAY

ERISA

Retirement industry firms need to start looking at how they'll potentially adapt to a new regulatory regime with stricter fiduciary standards from both a compliance and business strategic perspective, financial services members with BridgePoint Group LLC said.

Barbara March, chief executive officer of Flagler Beach, Fla.-based BridgePoint, said that she had heard a lot of “gloom and doom” with regard to the Department of Labor's proposed fiduciary rule at the SPARK Institute Inc.'s National Conference at which she was speaking.

But the proposed rule (RIN 1210-AB32) can also be viewed as a “glass half full, because with any change comes opportunities,” she said during the June 9 session.

The proposed rule, released in April, is likely to have the biggest impact of anything that has hit the retirement services industry in 40 years, March said.

As a first priority, businesses will need to think about strategy at a very early stage as their legal counsel reviews the DOL's proposed rules, March said.

“What we believe, and we're seeing as emerging as a best practice, is very quickly, business at a strategic level is getting involved,” she said, adding that, “at the end of the day, this is a business issue.”

Strategies, Growth Implications

March said BridgePoint looked at “four levers” that retirement industry businesses may use to increase growth, through:

• expanding relationships with current customers;

• selling current services to more customers;

• going into different market segments, such as small-market players expanding into the mid-market, or mid-market into the large market; and

• expanding “nonorganically” by acquiring other businesses.

Regarding the last, March said, “Some of you will be winners. For some of you, you'll be the acquirees versus the acquirors.”

Boutique firms would likely have to get even more specific about the services they provide to grow, while multidimensional firms would also likely see opportunities for growth, March said.

Greater transparency—a likely outcome if the finalized rule closely resembles the proposal—would cause downward pressure on adviser fees, and firms would be competing by taking on strengthened fiduciary responsibilities, March said. “For some of you, that's a natural. If you're a bank, you do fiduciary all day, every day,” she said.

If asset managers lose their ability to sell proprietary products because of restrictions under the proposed rule, they will have to compete more on adviser fees, March said. This development would likely accelerate a move toward using registered investment advisers, she said.

Excerpted from a story that ran in Pension & Benefits Daily (06/09/2015).

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