SAN ANTONIO, Texas – Unintended consequences.

That’s what’s keeping broker-dealers awake at night as theyconsider the implications of new regulations that would requirethem to live up to the higher fiduciary standards underconsideration by the Department of Labor.

“It’s actually not about us. We will adopt. We will find a wayto make it work. We move on. But it’s what the impact might be onthe client,” Patrick Rieck, who heads the corporate retirementbusiness at Morgan Stanley, said Wednesday.

The concern, he said, is that the regulations will make it moredifficult to deliver retirement services, resulting in a“detrimental impact on coverage.”

It was a sentiment echoed by all of Rieck’s co-panelists at aCenter for Due Diligence conference session focusing not just onfiduciary standards, but on regulatory scrutiny of IRA rollovers,proposed mandates to provide participants with better retirementincome projections and efforts by states across the country toestablish new retirement plans for private-sector employees.

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The concerns Rieck expressed were not new. While consumeradvocates favor the stricter approach – which would compel brokersto act in a client’s best interest – much of the financial lobby isdead-set against them.

Industry groups say the DOL’s efforts are a waste of effort,because the fraction of brokers who do take advantage of clients issmall. The Securities and Exchange Commission, the states andself-regulatory organizations already police the industry for suchconflicts, they say.

“There is no evidence of a crisis, no evidence of a problem,”Kenneth Bentsen, president of the Securities Industry and FinancialMarkets Association, known as Sifma, Wall Street’s largest lobbyinggroup, said this summer.

Regardless, the moderator of Wednesday’s CFDD panel, ERISA attorneyFred Reisch, said he expected the new fiduciary standard regulationto be finalized before the Obama administration leaves the WhiteHouse.

“A fiduciary regulation is likely next year,” he told theaudience.

Kevin Crain, managing director of Integrated Benefits at Bank ofAmerica Merrill Lynch, expressed the sort of frustration heard frommany in his business.

“Does the client today even think there’s an issue?” he asked.“Most investors believe the person they’re dealing with isproviding that higher standard of care. You don’t want to take awaychoice or impact cost.”

Morgan Stanley’s Rieck said the bigger issue was retirementcoverage. “Making it more difficult to delivery retirement servicesmeans unintended consequences, with a detrimental impact oncoverage. If you make it harder on someone to deliver theseservices, that’s going to have an impact,” he predicted.

David Reich, an executive VP at LPL Retirement Partners, said thatthe regulation will force his firm to shut out the“occasionalists.”

“We’ll have to limit their interaction (with plan sponsorprospects),” he said. “They don’t have the expertise to be afiduciary.”

The panelists expressed varying degrees of concern about potentialnew regulators regarding IRA rollovers, retirement incomeprojections and new retirement vehicles under considerations bystate legislatures.

The DOL, Reisch said, may “significantly” limit therecommendations advisors are allowed to make to retireesconsidering taking distributions from their 401(k).

Rieck said the idea that the DOL might make it more difficultfor an advisor to make what she or he considers appropriate fortheir client “is a little more than odd.”

“Folks need advisors,” he said. “The idea that you’d pushsomeone away they’ve known for a number of years is not veryfriendly to participants.”

On still-pending retirement income projection rules, Crain saidthe effort was “noble,” but that regulators should try to be sureto stay flexible.

“It must be understandable to participants,” he said. “Having 30pages of rules won’t help.”

The panelists all expressed concerns over efforts by asmany as 17 states to implement new retirement plans forprivate-sector workers employed by firms without a plan inplace.

“We don’t need a patchwork of regulations,” Rieck said. “Thereare plenty of other solutions out there. The states are ignoringthem. They don’t need to create another product.”

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