Commentary on Financial Advisor article by Karen Demasters
While the fate of the Department of Labor’s fiduciary rule hangs in balance, it’s already caused financial advisors to reevaluate their business models, Financial Advisor writes.
Fee-Based Approach Gaining Popularity
The rule may be delayed past its April 10 implementation deadline, but the lead-up has already made advisors and broker-dealers looks for ways to reduce their risk exposure and simplify costs, according to a survey of more than 6,000 advisors by research firm Cerulli Associates cited by Financial Advisor.
What’s more, almost 64% of advisors at broker-dealers intend to transition more business onto a fee-based advisory model, according to Cerulli, the publication writes. In all, 47% of advisors polled believe that if the rule goes into effect, the RIA model will become more attractive, Cerulli found, according to Financial Advisor. Wirehouse advisors have already been steadily leaving for the independent space, the publication notes.
According to Cerulli, advisors have also become more aware of cost and liability, the publication writes. That has led to an increased interest in lower-cost investment options such as exchange-traded funds, as well as passive investment products, Cerulli found, according to Financial Advisor. Among the respondents to the survey, 45% plan to use ETFs more frequently and 31% plan to use more passive products, the publication writes.