The Fiduciary Rule isn’t the 11th Plague, you can predict that

I’ve heard so many negative things about the impact that the fiduciary rule will have on the retirement plan business, you’d think Irwin Allen made a disaster movie of it. You’d think it was the 11th plague to free the Israelites from Egypt.

You hear so many predictions about the impact and they are all over the place. I saw one study that the rule will have a negative impact of $20 billion on the wealth management industry in 4 years. I’ve heard someone else claim that 150,000 financial advisors (presumably mostly brokers) will just leave the business. These “experts” might as well predict next week’s winning PowerBall numbers because they have as much chance of getting that right then correctly guessing the true impact of the new fiduciary rule.

150,000 advisors aren’t leaving the business. Morgan Stanley, Merill Lynch, and all the other large broker-dealers aren’t going to fold up their tent and leave the retirement plan business, they will adapt to the change. Why? They will still make money in the retirement plan business because there is enough opportunity out there.

The fiduciary rule will certainly have a negative impact on the wealth management business because the day of wine and roses for certain brokers is over. They won’t be able to push unsuitable proprietary or annuity products for retirement plans when they have to meet that best interest exemption, but $20 billion? Your guess is as good as mine.

The only thing you can predict is that many brokers will make less money, plan participants will pay less with better management fee rates and less expensive financial products, and certain wealth management firms will do quite well with the change. To quote one of my favorite actors Morgan Freeman from the disaster movie , Deep Impact: “life will on, we will prevail”. We’ll survive the meteor hit of the fiduciary rule this April, you can predict that.

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