A mix of RIAs, broker-dealers and other financial firms have weighed in on what the Department of Labor's proposed fiduciary rule could mean for them.

Three-quarters of advisors anticipate that the Department of Labor's proposed investment advice rule will change the way they do business, although over half of firms plan to wait until the rule is finalized before taking “any substantial action,” according to a Fidelity poll.

The proposed “Conflict of Interest Rule – Retirement Investment Advice” extends the categories and types of activities that would constitute “fiduciary-level” investment advice under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.

The DoL believes it will protect 401(k) and IRA investors by mitigating the effect of conflicts of interest in the retirement investment space. The proposal is part of what is already an intense debate over the fiduciary obligations of broker-dealers.

The Public Investors Arbitration Bar Association - encouraged by the proposal - said it has found that nine top US brokerage firms advertise in public as “though they are trusted fiduciaries acting in the best interest of investors,” but then “deny in non-public arbitration cases that they have any such duty to avoid conflicted advice.” The National Association of Plan Advisors, however, previously described the proposal as an “attack” on many advisors earlier last year, while 71 per cent of those recently polled by Fidelity anticipate heightened client frustration along with restricted advice.

“Advisory firms are considering re-evaluating their service models, the products they recommend and the investors they serve in response to the pending DoL fiduciary rule," said Tom Corra, chief operating officer at Fidelity Clearing & Custody Solutions. “While broker- dealers are especially concerned about what these changes will mean for their day-to-day business, they are not alone. Many registered investment advisors – who are already held to a fiduciary standard under the Investment Advisors Act – are also seeing the rule as challenging, particularly its impact on their rollover and IRA business.”

Among other survey findings: advisors anticipate a 5 percentage point decrease in the proportion of their individual IRA business; three-quarters expect to re-evaluate the types of clients they serve and 62 per cent plan to let go of, or transition, some smaller clients to other firms; 55 per cent, meanwhile, feel the rule will increase time spent on compliance-related task and three-quarters expect service costs per client to rise. In terms of revenue and product impact, advisors expect a shift to asset-based fees and level compensation across retirement and non-retirement accounts, as well as an increase in managed accounts; 66 per cent plan to re-evaluate the products they recommend and the associated fees charged.

Fidelity outlined six steps advisors can consider to begin preparing for the changes afoot:

1. Understand the full scope of your firm's retirement business;
2. Reviewing business practices and procedures in key areas including education, rollovers and referrals;
3. Consider high- level scenario planning to better understand the potential revenue impact and technology and compliance costs to implement provisions;
4. Explore potential new business models and segmentation strategies;
5. Identify changes to infrastructure and support that are likely to be essential for rule implementation; and
6. Engage legal, tax and compliance experts to help them fully understand the implications of the rule.

The rule is expected to be finalized early this year, Fidelity said. Family Wealth Report welcomes reader views on this highly-debated topic.

The firm types in Fidelity's study included 22 banks, 140 independent broker-dealers, 69 insurance companies, 108 regional broker-dealers, 63 RIAs and 83 wirehouses.