The years of regulatory tussle and tens of millions spent inlobbying dollars have produced a consistent claim from opponents ofthe Department of Labor’s proposed fiduciary rule: Low incomeAmericans and small-value retirement account holderswill be priced out of the financialadvisory market.

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Christopher Jones calls that argument a red herring.

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The chief investment officer of Financial Engines, which adviseson more than $110 billion in 401(k) managed account assets and hasrelationships with 670 plan sponsors, says the Sunnyvale,California-based firm proves as much.

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Credited by some as being the robo advisor before there wererobo advisors, most of the sponsors offering Financial Engines’managed accounts are of the mega variety; the averagesponsor-client has $1.5 billion in plan assets.

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But the average participant is of relatively modest means.According to the firm’s most recent 10-K filing with the Securitiesand Exchange Commission (SEC), median assets for enrollees inmanaged accounts is about $54,000.

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“We think the DOL is taking a big step forward,” said Jones, whohas been with Financial Engines since its founding in 1996. Heexpects the rule’s affects to be “profound” and “long-lasting.”

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Jones told BenefitsPro that today’s version of Financial Enginesmirrors co-founder and noble laureate William Sharpe’s originalvision, which was to leverage technology to bring low-cost,institutional grade advisory services to the common investor.

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Sharpe’s vision to build an advisory model free of conflictedadvice was conceived at a time when the “vast majority” offinancial advice was conflicted, according to Jones.

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“What the DOL is doing is a reflection of trends that have beengoing on for some time,” he said, underscoring that FinancialEngines has served in a fiduciary capacity since its inception.

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Notwithstanding his support for the DOL rule, Jones, like allstakeholders, is eager to see the finalized language, which isexpected to be released in a matter of weeks, if not days.

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“With any regulatory change of this complexity — and this one isgoing to be complicated — the devil is in the details,” hesaid.

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“Inevitably, there will be some things that won’t be perfect.Our hope is that the final rule minimizes the potential forunintended consequences,” explained Jones.

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Principal among Jones’ concerns is how the rule willdifferentiate between education and advice, the former beingcritical to the firm’s managed account model.

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He remains confident DOL will adequately consider FinancialEngines’ and other stakeholders’ concerns with language in theproposal’s education carve-out, which numerous comment letters fromplan providers, advisors, and ERISA experts criticized for notbeing specific enough.

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But in the big picture, Jones doesn’t expect the final rule tohave a significant impact on Financial Engines’ business.

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Some providers of financial advice may not be so fortunate. Inattempting to hold all advisors to IRAs and 401(k) plans with lessthan 100 participants to a fiduciary standard of care, the proposedrule clearly favors fee-based models of compensation overcommission-based models.

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While the proposal does not prohibit commission-based sales, itsBest Interest Contract Exemption isexpected to require extensive disclosure requirements on advisorsthat market commission-based services.

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Many stakeholders have said that complying with the BICexemption will be costly, and force commission-based accounts to afee-based model, which would beassessed annually.

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Opponents of the DOL have argued that could end up costing someinvestors more money over time. Jones doesn’t buy thatargument.

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“You can certainly construct scenarios where investors couldsave under a brokerage model, but the reality is that industry hasfought this rule tooth and nail, and not because they are trying tosave consumers money,” said Jones.

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“They fought it because the brokerage model is way moreprofitable than the DOL’s alternative,” he said.

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And that ends up costing most retirement savers, thinksJones.

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As a fiduciary standard is imposed industry-wide, Jones predictsthe fee model that the rule encourages will ultimately come underpressure.

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“The rule will put more spotlight on what it means to be afiduciary,” he said. “That will create greater scrutiny of fees,and push the market lower in the long run.”

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Jones also says the future of the fiduciary will be the hybridmodel, which pairs technological efficiencies with a human advisorytouch.

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Financial Engines recently made a substantial investment in thatprediction when it acquired The Mutual Fund Store for about $250million in cash and nearly 10 million shares of common stock.

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The acquisition was billed as a way for Financial Engines to getparticipants in its managed accounts more access to face-to-faceadvice at 125 Mutual Fund Store locations.

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Advisors at The Mutual Fund Store already act in a fiduciarycapacity, and place no limits on the accounts they advise, saidJones, who added that it is yet not clear whether The Mutual FundStore advisors will only serve Financial Engines participants goingforward.

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The expanded human capability to its fiduciary services willlikely impact how Financial Engines address the question of 401(k)rollovers to IRAs, a market in which the firm is trying to grow itsinfluence, according to filings with the SEC.

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The DOL’s proposed rule makes any recommendation to rolloverassets a fiduciary act. Few industry experts expect that to changein the final version.

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“Historically, the retail community has seen IRAs as anunfettered opportunity,” said Jones. “By correctly noting there hashistorically been a lot of abuse in the IRA market, the DOL rulewill create a much higher bar for advisors.”

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Some day in the not-to-distant future, when industry andacademics set out to gauge the impact of the DOL’s finalized ruleon the retirement investment market, their focus is likely to startwith how the IRA market was affected.

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The Investment Company Institute valued total IRA assets at $7.3trillion (and counting) at the end of 2015. One consequencemay be that more retirees leave assets in plan when they leave theworkforce.

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“In some cases it will be best to leave assets in a 401(k)plan,” says Jones. “But there are many legitimatecircumstances for an IRA rollover.”

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For both supporters and opponents of DOL’s rule, determiningthose legitimate circumstances will be the challenge goingforward.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.