Who Is Winning With the Fiduciary Rule? Wall Street
The rule requires brokers to act in the best interests of retirement savers, rather than sell products that are merely suitable but could make brokers more money. Financial firms decried the restriction, which began to take effect in June, as limiting consumer choice while raising their compliance costs and potential liability.
But adherence is proving a positive. Firms are pushing customers toward accounts that charge an annual fee on their assets, rather than commissions which can violate the rule, and such fee-based accounts have long been more lucrative for the industry.
In earnings calls, executives are citing the Department of Labor rule, known varyingly as the DOL or fiduciary rule, as a boon.
.. “Whether it’s in clients’ best interest is unclear,” said Steven Chubak, an analyst at Nomura Instinet. But the fiduciary rule is ”incentivizing firms to accelerate conversions“ to fees from commissions, he said, and “certainly the amount charged on a fee-based account versus a [commission-based] brokerage account is higher.” The push is speeding up an industry trend toward fees, which offer more predictable revenue than commission-based accounts.
.. The fiduciary rule also is supporting the shift to lower-cost index funds
.. Other changes stemming from the fiduciary rule could hurt over the longer term.
.. products such as higher-cost mutual funds face pressure from lower-cost passively managed funds