SIFMA Study: Costs of Fiduciary Rule Compliance Exceed $4.7 Billion
August 16, 2017 by Editorial Staff
A new SIFMA study says the brokerage industry will incur more than $4.7 billion in start-up costs related to the DOL’s fiduciary rule, InvestmentNews reports. That’s much more than the $2 billion to $3 billion estimated by the DOL.
The study, completed by Deloitte & Touche, jibes with news reports that broker-dealers are cutting back on the number and kinds of products they sell, the publication notes. About two-thirds of firms surveyed have reduced the number of mutual funds they offer while nearly one-quarter have nixed no-load and directly held funds.
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Twenty-one financial institutions participated in the study, representing 132,000 registered reps and advisors, or 43 percent of the brokerage industry’s registered salespeople, according to InvestmentNews. Those firms also control $4.6 trillion, or 27 percent, of retirement assets in the market.
On average, large BDs (those with net capital reserves of more than $1 billion) reported spending nearly $55 million in initial costs to comply with the fiduciary rule and expect continuing costs of $5.9 million, the publication writes. Firms with net capital of $50 million to $1 billion reported spending an average of $16.4 million in start-up costs and foresee average continuing costs of $3.2 million. And those with less than $50 million in net capital reported average start-up costs of $2.3 million and predict an average of $1.1 million in continuing costs.
SIFMA is a Wall Street trade group that has opposed the DOL rule, which requires brokers and advisors working with retirement accounts to place clients’ interests ahead of their own.