A survey of retirement advisors representing all advice distribution channels reveals about half expect the Department of Labor’s finalized fiduciary rule will help their businesses, according to Pioneer Investments, a provider of mutual funds and annuity products.

That’s a marked improvement in sentiment for the rule from last year, when Pioneer found that only 27 percent of advisors expected to benefit from the rule.

Those advisors now bullish on the rule said the regulation will help level the playing field on advice by eliminating competition from those not willing to accept the fiduciary requirements insisted on in the final rule.

That sentiment bolsters an argument often advanced by Labor Secretary Thomas Perez and other proponents of the rule leading up to its finalization—that the higher fiduciary requirements will help advisors already serving their clients’ best interests.

But the Pioneer survey also validates a core argument of the rule’s critics—that the cost of complying with the higher fiduciary standard will ultimately be passed on to retirement investors. Nearly half of the surveyed advisors said the rule would hurt investors by raising costs and limiting the availability of advice for small and middle-income investors.

Only 27 percent of respondents said the rule would hurt their businesses, and 15 percent said the rule would be a “non-event.”

Language in the final rule is far more accommodating of commission-based compensation on sales of investments, relative to the proposed version, which many stakeholders said would have effectively banned commission-based compensation.

But the final rule is explicit in saying that any recommendation to roll over 401(k) assets into an IRA will be considered a fiduciary act.

Some analysis has suggested the rule’s greatest impact will be on the IRA market, but half of the respondents in the Pioneer survey said they expect the rule to have little or no impact on their IRA business; 23 percent expect a moderate to high negative impact on their IRA business; only 12 percent expect a positive impact.

“The impact on IRA rollover businesses will vary by type of advisor,” said Fred Reish, and ERISA attorney at Drinker Biddle and Reath. Reish participated in the webinar when Pioneer polled nearly 850 attending advisors.

“For advisors working as registered representatives of broker-dealers the impact will be pretty high, whereas smaller firms may be able to adapt to the rule more easily,” said Reish.

Blaine Aikin, executive chairman at fi360, a provider of practice management tools to advisors and a strong supporter of DOL’s rule, acknowledged the new regulation will have considerable ramifications for the investment advisory industry.

“I certainly agree that there is going to be a significant transition period, and that always entails some level of cost,” said Aikin. “But if you look longer term the benefits definitely are there for the investors, and I expect will ultimately pay off, so it makes sense that the industry is divided on this.”

The rule’s Best Interest Contract Exemption, which advisors will be required to present to investors if they recommend commission-based investments or recommend an IRA rollover, is expected to move more advisory services to a level, or fee-based compensation model.

Of the advisors Pioneer polled, 61 percent said they already use a level fee compensation model, and consequently do not expect to heavily rely on the BIC exemption.

But 17 percent of respondents that said they use a non-level model can expect to use the BIC exemption routinely. Of those advisors that market commission-based services, 20 percent said they will move to level compensation models to avoid having to use the BIC exemption.

Instant Insights /

More advisors say DOL rule may help them but hurt investors

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