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Watch What You Charge, with or Without the Fiduciary Rule
Financial Advisor; March 7, 2018
Financial advisors who charge more than their peers for products and services are in the greatest jeopardy under the concept of “reasonable compensation limits,” the compliance idea that the Department of Labor has brought to the forefront with its fiduciary rule.
But at the same time, the DOL didn’t create that idea. Reasonable compensation limits have been, in fact, already created by ERISA and IRS codes. And these won’t be undone by the DOL, the SEC or Finra rule-making, said Fred Reish, a partner with Drinker Biddle in Los Angeles and a leading expert on the DOL’s fiduciary rule.
“These limits are here to stay,” the veteran securities attorney said in an interview with Financial Advisor.
“Where we will see the most impact of these limits are on advisors who are outliers in terms of compensation,” Reish added.
“If you are an advisor, you will definitely have to think about what services you’re providing in order to justify what you charge. If you just want to just sell products and not offer service, you’ll have to charge less. If you’re an overpriced advisor, you’ll have to offer more services.”