Research reveals seven in 10 US advisors will disengage from mass-market investors as a result of the DOL fiduciary rule.
(London, November 2016) The DOL’s fiduciary rule could create a significant advice gap as mass-market investors are left out in the cold by financial advisors, according to a recent study.
It's no secret that this year has been a volatile one for the markets. The S&P 500 is down 18% year to date, while the Nasdaq Composite is off by 27% year to date. Meanwhile, the VIX, a key measure of volatility, is up 49% year to date at 24.72. However, it has spiked as Read More
A report by CoreData Research, surveying 552 US financial advisors, found a strong majority (71%) plan to disengage from some mass-market investors because of the DOL rule. On average, these advisors estimate they will no longer service a quarter (25%) of their mass-market clients — creating a potential advice gap for low-balance investors.
The expected move away from mass-market clients comes amid concerns the fiduciary rule will make advice too costly. The majority (64%) of advisors think the rule will have a largely negative impact on mass-market investors and four in 10 (39%) think financial advice will become too expensive for most investors.
The rule, which requires advisors to act in the best interests of clients and disclose potential conflicts of interest, is set to come into effect in April 2017. However, it could be subject to revisions — or even a rollback — under the incoming Trump administration.
Opponents of the fiduciary rule argue smaller clients will be hit with unaffordable fees, thereby limiting their access to advice — as was the case when similar regulation was introduced in the UK. A previous CoreData Research study revealed UK advisors believed the Retail Distribution Review (RDR) had created an advice gap, with over half (52%) claiming its introduction negatively impacted mass-market investors.
“The election of Donald Trump introduces a degree of uncertainty over the fiduciary rule,” said Craig Phillips, head of International, CoreData Research. “However, our research suggests the rule could result in mass-market clients being left out in the cold, creating the prospect of an advice gap in an echo of what happened in