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Recent LIMRA Secure Retirement Institute study explores B-Ds’ views on impact of DOL fiduciary rule.


WINDSOR., Conn.,BD Firms Sept. 26, 2016—According to a recent LIMRA Secure Retirement study, 54 percent of Broker-Dealers (B-Ds) surveyed believe some of their advisors will retire rather than sell under the new business rules to comply with the Department of Labor’s fiduciary rule.

“Because the rule increases advisors’ liability, B-Ds also expect their advisors to stop providing advice to clients with lower IRA account balances,” said Kathy Krozel, research director, LIMRA Distribution Research.  “At a time when more Americans need access to advice, it appears that the new DOL rule may actually reduce access for middle income consumers.”

The Institute found that most B-D firms (8 in 10) plan to employ both the PT 84-24 or BIC exemptions allowed under the new rule, while nearly three quarters will use fee leveling/fee offset. Firms said they will employ multiple strategies in order to ensure compliance (chart).

Two thirds of B-D firms believe the increased cost of compliance will ultimately be passed on to the consumer and 9 in 10 B-Ds agree that the rule will increase consolidation in the industry – most likely affecting smaller firms. 

“Historically our research has shown that larger companies benefit from the economies of scale when there is significant change in the market,” noted Krozel. “Smaller firms may be unable to afford the high cost of implementing the changes needed to comply with the rule and some may opt to merge with their larger counterparts.”

When asked about the four largest impacts of the DOL fiduciary rule to their business, 75 percent of B-Ds believe the risk of litigation would be exacerbated by the DOL fiduciary rule.  Seven in ten think the rule will force changes to advisor compensation practices and structures.  The cost of compliance – both in changing business practices and reporting – round out the last two impacts cited by B-Ds.

“The feedback we received from the B-Ds is aligned with responses from carriers and advisors,” Krozel observed.  “This is a transformational event in the financial services market.  Intentional or not, the DOL fiduciary rule will change the landscape of the retirement market for decades.”

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About LIMRA Secure Retirement Institute 

LIMRA Secure Retirement Institute provides comprehensive, unbiased research and education about all aspects within the retirement industry to improve retirement readiness and promote retirement security. For more information, please visit www.secureretirementinstitute.com

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