You’ve heard people screaming up and down about the fiduciary rule. They just had someone screaming that the fiduciary rule is a boon for lawyers (thank you) and that 100,000 to 150,000 advisors will leave the 401(k) business. You’ve also heard how plan sponsors won’t be able to find advisors is they have smaller plans and how many will terminate their plan than deal with the new rule. They claim the sky will fall and that the end is coming for the retirement plan business.
The problem with this Chicken Little argument about the sky is falling is because we heard it before. We heard many of these similar arguments when fee disclosure regulations were being implemented in 2012. We were told that compliance was going to be too much for providers, we were told that there would be a race to zero for fees and only low fee providers would get business, and we were told that plan sponsors were going to terminate their plans over it. You know what? The retirement plan industry is in better shape today that it was 5 years ago.
With any type of change, there will be winners and there will be some losers. Registered investment advisors who have always acted in a fiduciary capacity will do well as will broker-dealers who understand the business as they morph into being plan fiduciaries. People in this business will bank on this change, others will go broke. People take advantage of change or they let change take advantage of them. There will be broker-dealers who will leave the 401(k) business as will many advisors, but any change in this business creates change where providers exit and enter the industry.
Regardless, the retirement plan industry will survive. If 100,000 to 150,000 advisors leave the business, there will be a hungry group of advisors that will just pick up the slack. That is the beauty of a competitive business, the retirement plan business will see other days after April 2017, the sky will not fall.