Planners: We’ll Comply With DOL

By Cyril Tuohy

Planners say their “core mission” of delivering advice to investors large and small will not be affected by the Department of Labor’s new fiduciary rule, key elements of which take effect in a year.

Many of the new rule’s requirements will entail procedural changes. That will mean new costs for advisory practices around the country, but they aren’t expected to amount to “ongoing big costs,” said Ray Ferrara, chairman and CEO of ProVise Management Group in Clearwater and New Port Richey, Fla.

As a result, pricing for products and services isn’t expected to change due to the “Conflict of Interest” rule, which was released by the DOL last week.

“We do not anticipate any material change in pricing of our services or level of services we provide our clients,” said Chris Draughon, director of planning with First Coast Wealth Advisors in St. Augustine, and president of the Financial Planning Association of Florida.

Ferrara, Draughon and Bob Gerstemeier, president and founder of Gerstemeier Financial Group and former chair of the board of directors of the National Association of Personal Financial Advisors, said they welcomed the rule changes made by the DOL following public feedback. Gerstemeier is a fee-only planner; Ferrara and Draughon receive compensation through fees as well as commissions.

Critics of the rule said it would raise the cost of doing business for financial advisors and force many of them to abandon small investors who are less profitable.

Proponents of the rule include President Barack Obama, consumer organizations, labor unions and AARP.

They maintain the rule is necessary to suppress conflicts among commission-based brokers and advisors who can’t represent the best interest of investors if they have the opportunity to be paid by insurance companies and mutual funds to recommend one retirement product over another.

Legislative Challenge Likely to Fail

Marilyn Mohrman-Gillis, managing director of public policy and communication with the Certified Financial Planner Board of Standards, praised the DOL for striking a balance between protecting the interests of retirement investors and preserving access to advice.

Talk has already surfaced with regard to opponents suing to overturn the rule, but many analysts say it will be a tall order to make the case.

Were House Speaker Paul Ryan, R-Wis., to challenge the rule with legislation, Mohrman-Gillis said such a move would unlikely survive — and in any case would succumb to a president’s veto.

Democratic candidates Hillary Clinton has come out in favor of the rule and a Democratic president would likely support the rule, she said.

CFP, the Financial Planning Association and the National Association of Personal Financial Advisors make up the Financial Planning Coalition, which made the advisors available to discuss the effect of the rule on their business practices.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].