BISA Magazine - Quarter 2, 2017 - 25

"We're all for the fiduciary standard, but the rule is
too draconian and too narrow," said Vance Richard
[Iberia Financial Services].

hat do consumers
think of the DOL's
fiduciary duty rule?

There has been
general support for
the rule and its intentions, said Wayne
Cutler, executive vice president of
Novantas, during a session called "DOL:
The Customer Lens" at BISA's recent
annual convention in Hollywood, Fla.
Cutler presented DOL data from a
survey that his firm conducted with Informa Research Services.1 A number of
respondents thought the fiduciary rule
would "get rid of the bad actors."
On the negative side, Cutler said feedback from the survey is the rule is too
narrow, enforced by the wrong agency
(DOL instead of the Financial Industry
Regulatory Authority or the Securities
and Exchange Commission), and comes
with a high litigation cost.
Others worried that it might have
unintended consequences for the mass
market segment, which might now
need robo-advisors, Cutler said.
Tom Mudlaff, senior vice president of
supervision and controls for Capital
One Investing, echoed the positives.

"We're all behind [the rule's] good
intentions," he said, referring to the
idea of holding to a higher fiduciary
standard.
What do bank brokerage program
managers make of the Department of
Labor's (DOL) fiduciary duty rule?
"We're all for the fiduciary standard,
but the rule is too draconian and too
narrow," said Vance Richard, senior
vice president and program manager
for Iberia Financial Services. The rule
should also be applied to non-qualified
money, he said. In addition, the unintended consequences from the rule for
the mass market is a concern. It might
encourage people to stay in 401(k)
plans, which isn't always the best thing
to do, in his view.
"It's making our [advisors'] books
more efficient," said Rhomes Aur, CEO,
FTB Advisors (First Tennessee Bank),
another participant in the session. Aur
was pleased about the rule's recent
60-day postponement, and said that
by the third quarter of 2017, his group
expected to have a new robo-advisor
platform in place to help comply with
the rule (whether it is or isn't eventually implemented).

Did the rule spur changes to banks' operating models? Among the key takeaways
from his firm's study, Cutler said, were
that some banks were changing their
compensation plans to minimize conflicts
of interest while others were accelerating
introduction of robo-advisor platforms.
Aur's institution recently changed its
advisor compensation plans to remove
potential conflicts of interest. Also,
broker incentives were halved for
smaller accounts - those with less than
$50,000 - to incent advisors to seek
higher-net-worth clients.
Novantas and Informa Research also
asked consumers if they would consider using a self-directed platform for
their retirement accounts, a so-called
robo-advisor. "There is some appetite
for using robos," Cutler said, noting
that between one-fifth and one-third of
those surveyed said they would.
Overall, is the fiduciary duty rule seen
as good for consumers? Thirty-eight percent of survey respondents agreed completely that it was good for consumers,
Cutler said, while another 49 percent
said they agreed somewhat. "People
in general think it's a good thing - a
reasonable thing," Cutler said. ▲

1. Cutler's DOL data was from two sources: 1) executive interviews with banks like SunTrust, KeyBank and USBancorp, and 2) an extensive household survey, a joint effort between Novantas Inc. and Informa Research Services, that gathered 1,200 completed household surveys that were segmented (based on investable assets) into four groups:
mass market (<$100k), mass affluent ($100k - $500k), affluent ($500k - $1 million), and high net worth (more than $1 million).

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BISA Magazine

Table of Contents for the Digital Edition of BISA Magazine - Quarter 2, 2017