The Department of Labor’s fiduciary rule has been the center of the financial world’s attention for the past year, and that’s not ending anytime soon. Already a known supporter of the deal, the Executive Branch recentlyconveyed an emphatic message about its stance in the battle for broker compliance. After ongoing talks from congressional meetings that implicated aproposed blockage of the DOL’s rule, in late April President Obamaguaranteed a veto of any alleged “disapproval bill” that would eradicate plans to regulate broker fiduciary standards.
So what’s this all really about?
It all starts with the lesser-publicized fact that there are two different kinds of investment firms that exist in the financial services world. One is a sales organization (Broker-Dealers that sell financial services products). The other is an advisory organization (Registered Investment Advisors). Sales and advisory organizations are separate entities with severely differing strategies in how to obtain and manage their clients. Advisory firms are built in a way that is meant to optimize a client’s outcome, and sales organizations look to maximize profits while also aiming to produce positive results for those they advise. The Department of Labor’s rule was primarily made to highlight these distinct differences, so that the public may fully understand the impact of hiring either type of firm.
The Blue Vault Summit could not have been more perfectly timed. This gathering of the Broker Dealer and Sponsor communities provided insightful and open discussion from several vantage points. These conversations are paramount, especially in a time of significant regulatory change.