RIAs will – and should – continue to prepare to meet the new DOL fiduciary standard for retirement plans, even if they expect it to be changed or eliminated by the incoming Trump Administration, says Knut A. Rostad.
Firms cannot go backwards now and say they will not put the best interests of their clients first, says Rostad. They need to continue to develop the best practices and the infrastructure to meet the new regulations that take affect in April.
Rostad, president of the Institute for Fiduciary Standard, a research and educational organization to promote the fiduciary standard, was a speaker at the Market Counsel Summit 2016 in Miami Tuesday. Market Counsel is a business and compliance consulting firm for investment advisors.
Most advisors expect the rule to be amended or even eliminated by the new Trump Administration, but most also have taken some steps to meet it. In addition to the being forced to meet the new fiduciary standard rules, advisors and broker-dealers are feeling pressure from consumers to meet higher standards and to be more transparent about fees, Rostad says.
“Advisors should not wait for further clarification from the new administration, but should be prepared for the existing April deadline, both on a compliance level and on a marketing level,” he adds.
Rostad uses Merrill Lynch as an example of what broker-dealers probably will do, which is to continue implementation of the DOL rule and to use the changes as fodder for marketing campaigns to show they are serving clients to the best of their ability.
However, boker-dealers are not good at raising their own standards unless forced to and if there is no enforcement of the DOL rule, or it changes, Rostad predicts broker-dealers may not make as much progress toward compliance and transparency as they should.
“For investors, this means more confusion in the short term about what standards advisors are meeting,” he says.
CFA Institute, an organization that promotes high standards of ethics and education among financial professionals, essentially agrees. Advisors began implementing the new rule when they anticipated Hillary Clinton would win the presidency and probably will continue to do so, the CFA Institute says.
“Changes [made] to comply with the rule are now baked into their strategies with sunk costs that can’t be recouped by a wholesale repeal of the DOL rule,” CFA Institute said in a statement released Wednesday. “As such, investors should continue to prepare as if the rule will go into effect.