The Department of Labor in the U.S. estimates it will cost no more than $6 billion over 10 years to implement its fiduciary rule, which broadens the definition to include broker-dealers and providing a fiduciary, rather than just a suitability standard for most of the country’s financial advisors.
Good news, right? Not so fast.
The Securities Industry and Financial Markets Association released comments last week that are highly critical of the DOL’s move. Especially concerning is the failure by the agency to accurately estimate the true costs of implementing the fiduciary standard.
SIFMA estimates the cost over 10 years including start-up will be closer to $16 billion, almost three times the DOL projections.
“It is not possible and would be improper to use the SIFMA Data to estimate the cost of a separate and distinct Department regime,” SIFMA commented. “Because the Department did so, they started with a false premise, followed a flawed methodology, and generated costs estimates that are unfounded, inaccurate, and otherwise fatally flawed.”
But SIFMA aren’t the only ones who have a problem with the costs of implementing such a standard. Individual firms, including some of America’s largest advisor networks, also have a bone to pick with the Department projections.
“There are definitely going to be added costs to comply with all this regulation, and it’s going to make its way to the consumer in one form or another,” writes LPL Financial CEO Mark Casaday. “We certainly think they’re going to be substantial to create the technology that’s needed, but we’re still trying to define what substantial means [in this context].”
So, here in Canada, at least based on costs, some advisors are already suggesting advocates of fiduciary standard should be careful what they wish for. They just might get it.