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DOL Fiduciary News: October 31, 2016

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Broker-dealers split on commissions in wake of DOL fiduciary rule

InvestmentNews; Oct 30, 2016 @ 12:01 am

After months of silence, large brokerage firms are beginning to announce their strategies to comply with the Labor Department's fiduciary rule.

Morgan Stanley, Ameriprise Financial Inc., Raymond James Financial Inc. and Commonwealth Financial Network last week showed their cards, finally answering the question that's weighed on their advisers and the broader financial services industry: Would they keep commissions on retirement accounts intact, or shift to an entirely fee-based advisory environment?

DOL Rule Impacts Far More Than Advisors' Pay [conference coverage]

Fri, Oct 28, 2016; Retirement Income Journal

Although some financial services companies are still stuck in one of the first four stages of grief (denial, anger, bargaining and depression) over the Department of Labor’s fiduciary rule, a few companies are already well past the fifth stage—acceptance—and have tweaked their businesses to fit the new normal. 

Attorneys from three firms in the latter category—Vanguard, USAA and OneAmerica—shared war stories about how their companies have adapted to the DOL rule in a presentation to a standing-room-only crowd at LIMRA’s annual conference in Chicago this week.

DOL fiduciary rule FAQs emphasize dangerous compensation practices — including for RIAs

InvestmentNews; Oct 28, 2016 @ 1:29 pm

Most of the impact of a Labor Department regulation to raise investment advice standards for retirement accounts hits brokers, but investment advisers also have to comply with the measure — a point that was emphasized in agency guidance this week about the rule.

In a 24-page document that covered 34 questions released Thursday, the agency answered some of the most frequent queries they're getting about the rule, which requires advisers to 401(k) plans, individual retirement accounts and other qualified accounts to act in the best interests of their clients.

DOL to Nix Retro Grids, Back-End Bonuses As Morgan Stanley Pulls Deals

Financial Advisor; OCTOBER 28, 2016

The U.S. Department of Labor will ban retroactive payout grids and back-end recruitment bonuses, according to interpretive guidance released by the department on Thursday. The changes are associated with the DOL’s new fiduciary rule for retirement accounts.

Notably, the DOL’s guidance, under the heading “Conflict of Interest Exemptions FAQs,” said that back-end recruitment incentives would be forbidden as of the date of the notice, or October 27.

“So with two hours' notice, you have to stop all recruitment deals,” said Howard Diamond, general counsel at Diamond Consultants, a recruiting firm. “I’m aghast, dumbfounded” at the DOL’s action, he said.

Did the fiduciary rule just kill huge recruiting bonuses?

Financial Planning; October 27 2016, 4:38pm EDT

The Department of Labor's fiduciary rule is upending the wealth management business in unexpected ways. The latest target: lucrative recruiting bonuses to entice advisers to switch firms.

Initial signing bonuses, or "front-end" awards, are compatible with the best interest contract exemption, the Labor Department says in a new FAQ issued Thursday

How Your IRA Costs Stand to Change as Commissions Fade in Favor of Fees

The Wall Street Journal; Oct. 28, 2016 12:45 p.m. ET

Commissions are at the center of a new brokerage battle.

Stockbrokers for years have been moving away from commissions—payments per trade—as a way to charge their customers. Instead, they have been pushing fee-based accounts, where they charge a percentage of assets regardless of the amounts of trading.

For investors who rarely traded, though, commissions remained the more cost-effective approach.

Fiduciary rule prompts 401(k) providers to halt innovation, focus on compliance; October 28, 2016

Innovations in plan design, services, and communications geared to improving 401(k) participants’ retirement outcomes have slowed demonstrably in the immediate aftermath of the Department of Labor’s fiduciary rule.

The reason is that service providers have turned their focus to complying with the fiduciary rule.

The ability to improve retirement outcomes by delivering more personalized advice has been the primary differentiator record keepers have leveraged in a highly competitive market, says Cynthia Hayes, president of Oculus Partners, a consultancy that advises on business development practices for service providers and asset managers.

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