The Quest for Retirement Assets: When the Light Shines on the Fiduciary Standard

by Kelley Byrnes, January 31, 2017
Regulation
North America

Abstract

In response to the Department of Labor (DoL) Rule, some of the wirehouses and larger independent broker-dealers (IBDs) have decided to take drastic steps.

Celent has released a new report titled The Quest for Retirement Assets: When the Light Shines on the Fiduciary Standard. The report was written by Kelley Byrnes, an Analyst with Celent's Securities & Investments practice.
 
This report explores how brokerages are changing their fee structure, as well as training and compliance, in response to the industry focus on the fiduciary standard.
 
In response to the Department of Labor (DoL) Rule, some of the wirehouses and larger independent broker-dealers (IBDs) have decided to take drastic steps. Merrill Lynch has decided to ban commissions in retirement accounts. Other firms have decided to employ the Best Interest Contract Exemption (BICE) to allow advisors to receive commissions if their clients sign an agreement first.

Regardless of whether firms decide to ban or keep commissions, firms are changing their business model from a product-centric to an advice-centric model. Additionally, enterprises and advisors must come up with a clear explanation of their services, reinforcing that they are working in the best interest of their clients. Investors are becoming increasingly aware of the “fiduciary” standard.

Banks and brokerages are providing fiduciary and retirement-specific training to advisors, and in turn, creating designations for advisors who satisfy the requirements. Firms are hiring specifically for retirement specialist roles, where individuals interact with retirement plan participants and sponsors.
 
“The specific titles and credentials that brokerages bestow on advisors can be misleading to investors. It would be helpful if an independent third party created a meaningful test that could be applied across wealth management firms. fi360 is one of the companies working toward this goal,” commented Byrnes.

“Over the next 12 to 18 months, it is certain that more vendors will create solutions to aid firms and advisors in their efforts to provide fiduciary training and comply with the DoL rule,” she added.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

2

 

Financial Regulation Primer

2

 

A $24 Trillion Market

3

Capturing the Retirement Market

5

 

Commissions in Retirement Accounts

5

 

Credentials and Designations

7

Looking Ahead

10

 

Technology

10

Leveraging Celent’s Expertise

11

 

Support for Financial Institutions

11

 

Support for Vendors

11

Related Celent Research

12

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