Senator Tells DOL to Stop Implementing Fiduciary Rule as It Will Be 'Undone'

According to CoreData Research, which polled 552 U.S.-based advisors and was conducted by the firm's UK arm, 71% of the advisors plan to "disengage from some mass-market investors" because of the DOL rule. On average, these advisors estimate they will no longer service a quarter (25%) of their mass-market clients — creating a potential advice gap for low-balance investors, the research states.

"The election of Donald Trump introduces a degree of uncertainty over the fiduciary rule," said Craig Phillips, head of CoreData Research International. "However, our research suggests the rule could result in mass-market clients being left out in the cold, creating the prospect of an advice gap in an echo of what happened in the U.K. when the [Retail Distribution Review rule] came into effect."

A previous CoreData study revealed UK advisors believed the RDR had created an "advice gap," with more than half (52%) claiming its introduction negatively impacted mass-market investors.

The CoreData research of U.S.-based advisors, which was not commissioned, also found that 58% of advisors currently receiving commissions will move away from the practice by 2020 in order to get ahead of potential future regulation, and that 94% of advisors believe smaller clients "orphaned" by advisors are likely to turn to automated advice.

The CoreData research of U.S.-based advisors also found that:

• Two-thirds (64%) of advisors view the impact of the fiduciary rule on mass-market investors as largely negative. And 60% believe the fiduciary rule will have a negative impact on at-retirement clients.
• A third (35%) of advisors will likely add an automated advice service to their business because of the fiduciary rule.
• Six in 10 advisors (62%) say they will increase ETF recommendations in their retirement accounts due to the rule.
• 60% of advisors say they will decrease allocations to non-traded REITs and 57% say they will limit offering variable annuities in retirement accounts due to the fiduciary rule.
• Three in four advisors (74%) think the fiduciary rule will be expanded to nonretirement accounts.
• In the long term, 55% of advisors believe, commission on retirement accounts will eventually be banned. Twenty-four percent of this group believe commission on all accounts will be banned.
• Almost half (45%) of advisors believe investors would rather have cheaper, non-fiduciary advice than more expensive fiduciary advice.
• Over a third (36%) of advisors plan to hire additional staffers as a result of the rule, and 86% plan on working more hours per week.
• Nearly all advisors (95%) see the financial advice industry moving toward a model based on transparency and full disclosure.