Are 401(k) Advisors on Track With Fiduciary Rule Standards?

"Chicken parm you taste so good."
“Chicken parm you taste so good.”

Peyton Manning can put it to a jingle. A recently-released survey from Nationwide finds the new Department of Labor (DOL) fiduciary rule has most advisors considering changes to their business model as they wait to learn their firm’s new compliance procedures.

“This is about where we thought it would be,” said Kevin McGarry, director of the Nationwide Retirement Institute, in a statement. “Firms are taking this seriously, but still have a lot to work through. As we move through the next 18 months, we anticipate shifts in product mix and levels of understanding and concern.”

While advisors provided varied perspectives regarding how they plan to change their mix of products sold, 43 percent may plan to expand services offered to more holistic planning and 26 percent may plan to focus on non-qualified accounts.

“The survey insights show that advisors are considering a shift from a transaction-based business model to more of a service-oriented model,” McGarry said.

Advisors eagerly awaiting firm’s plans

Just 42 percent of advisors say they are aware of their firm’s timeline for implementation or what training or support the firm will provide, while only a third (33 percent) are aware of their firm’s new compliance procedures.

The Best Interest Contract Exemption (BICE) continues to be an area of great concern for firms and advisors. Only 23 percent of advisors are aware of their firms’ plans with respect to adoption of the BICE to sell variable compensation products. At the same time, 78 percent identified the BICE as one of the greatest areas of impact to their business.

“This data affirms what we’re seeing across the country,” McGarry said. “Firms are busy working through the new rule, figuring out what it means for their specific situation and developing their game plan to implement by next spring.”

Advisor challenges

As the industry works through this new regulatory environment, advisors are eager for information about the new rule. The advisors Nationwide surveyed consider themselves at least somewhat knowledgeable about:

  • Fiduciary requirements (82 percent)
  • Products subject to fiduciary standards (76 percent)
  • Fee/compensation disclosure requirements (76 percent)
  • BICE (73 percent)
  • What is considered advice vs. education (69 percent)
  • Grandfathering provisions/conditions (64 percent)
  • Levelized compensation requirements (64 percent)
John Sullivan
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.

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