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DOL Fiduciary News: October 13, 2017

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House panel approves legislation to kill DOL fiduciary rule, and 2 other adviser-related bills

InvestmentNews; Oct 12, 2017 @ 4:40 pm

The House Financial Services Committee on Thursday approved legislation that would kill the Labor Department fiduciary rule and replace it with an investment advice regulation to be written by the Securities and Exchange Commission.

In a 34-26 vote along party lines, the panel sent the Protecting Advice for Small Savers Act to the House floor. The measure, written by Rep. Ann Wagner, R-Mo., reflects GOP concerns about the DOL rule, which requires brokers to act in the best interests of their clients in retirement accounts.

The committee also approved legislation that would revise the accredited investor standard to allow more people to buy unregistered securities and passed a bill that would provide legal protection for financial advisers who report senior financial abuse to authorities. Each of these measures received almost unanimous support.

The bills now go to the House floor, where votes have not yet been scheduled.

DOL Could Act This Month on Fiduciary Rule Extension

Financial Advisor; October 12, 2017

The Department of Labor this month might finalize its transition period for the fiduciary rule, extending it to July 2019 as earlier proposed, according to experts at the Drinker Biddle law firm.

“If I were to bet, I think it will happen by the end of the month,” said Brad Campbell, a partner in the firm’s employee benefits and executive compensation practice group.

Among other things, the DOL’s transition period provides temporary relief from the rule’s best-interests contract exemption, which creates a path for use of commissioned products in IRAs. The DOL has proposed extending the transition period from the current end date of January 1, 2018. 

... “I think that that [two-year transition] period is essential … for the department  to do the work” in making any changes to the final rule in coordination with other agencies, said Campbell, a former DOL official, speaking on a conference call Thursday.

The New Rules That Could Make ETFs Unstoppable

Bloomberg; October 12, 2017, 12:01 AM EDT

Passive investments, already eating away at active managers’ assets, are getting another boost. That effect is on the radar of companies such as BlackRock Inc., which has $5.7 trillion in assets. “We’re seeing regulatory changes change the ETF environment,” Chief Executive Officer Laurence Fink said on a July 17 earnings call. “We do believe we’re seeing accelerated flows because of MiFID II, because of the movement toward the fiduciary rule in the United States.”

Three rules will make exchange-traded funds more accessible to new types of investors. In the U.S., the fiduciary duty and new insurance guidelines will enable retirement savers and insurers to raise their exposure to ETFs. In Europe, the Markets in Financial Instruments Directive II is expected to increase flows from retail investors.

Changes may not show up immediately when MiFID II takes effect on Jan. 3. Tom Bartolacci, head of European ETF capital markets at Vanguard Group, says it will take time for investors to digest the newly reported information before we see significant flows: “Maybe it’s not a meaningful spike in trading volume or inflows in January, but that’s a step to building a foundation for an ETF industry that will serve all investors.”

PANC 2017: Business Models of the Future

PLANADVISER | October 12, 2017

Unquestionably, the Department of Labor (DOL) fiduciary redefinition—aka the conflict-of-interest rule—has had an effect on the advisory industry. And that effect has especially been felt in fee models.

Nearly one-third (32%) of attendees of a panel at the 2017 PLANADVISER National Conference said they have made a change from commission-based to fee-based pricing. However, 45% indicated there has been little change to their fee model because they already offer fee-based approaches, and 9% have likewise made little change because they will utilize the provided exemptions.

Rick Shoff, managing director of CAPTRUST Financial Advisors, says the fiduciary rule is a non-issue for his firm because services have always been fee-based. “[The rule] validates our decision to work in the best interest of clients as a fiduciary under a contract,” he said. He told attendees if they can align working in clients’ best interests with how they get paid, they will get business. 

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