Inauguration Day is six weeks away, and plenty of uncertainty remains surrounding what action, if any, the incoming administration will take on the Department of Labor’s Fiduciary Rule for qualified retirement accounts. But dramatic changes to financial advisor compensation appear likely to occur regardless of what happens to the Rule. Why? Because many firms want to change the way they compensate their advisors to remove conflicts even if the Rule is repealed.

When asked the question, “Will your firm implement some aspects of the intent of the Rule even if it is repealed?”, nearly half of the bank and credit union executives that participated in Kehrer Bielan’s recent DoL Readiness Survey said their firms will change advisor compensation to remove conflicts. Another 29% said their firms will adopt a Best Interest Standard, and 5% said their firms will eliminate commission products, even if the DoL Rule is thrown out.


Why would these executives want to undertake such dramatic changes to advisor compensation if they aren’t being forced to do it?

Some executives argued that the industry has already moved too far in the direction of modifying advisor compensation to be compliant with the Rule to turn back. “Seems likely that the large shops have invested too much time and money to want the rule reversed,” commented one bank executive.

Other executives defended the Rule on its merits. Taking steps to “eliminate the risk of reps choosing higher commissioned products over others” will help to “protect the reps from themselves and ultimately result in less customer complaints,” argued another bank executive.

Yet another respondent put it more bluntly: “We believe that this rule is long term good for the industry and clients.”

So even in the absence of a mandate from DoL, many bank and credit union investment services executives appear poised to seize on the opportunity presented by the uncertainty surrounding the Rule to change their advisor compensation models to remove the potential for conflicted advice and better align advisor comp with the goals and objectives of the firm.

Seventy-seven bank, credit union, third party broker dealer, and product partner executives participated in the Kehrer Bielan DoL Readiness Survey, an online survey conducted on November 15-16. Look for additional findings from the survey in future Highlighters.