Kirkland & Ellis: Ramifications of the DOL Ruling

NEW YORK - April 13, 2016 - PRLog -- On the precipice of the Department of Labor's fiduciary ruling, Norm Champ, Partner of Kirkland & Ellis LLP and former SEC Director, sat down with Courtney Woodworth at Asset TV to discuss the ramifications the ruling will have across different sectors of the financial industry.  Since the interview, the DOL ruled in favor of the fiduciary standard, making Norm's insights even more applicable.

The new fiduciary rule will now apply to everyone within the financial industry, including brokers, banks, insurance companies, mutual funds, etc., having enormous effects across the board for any individual or institution providing advice on a retirement account. While the main goal of switching to the fiduciary standard is to protect the investor through a higher level of transparency by making it a law that institutions must only make investments that are in the client's best interest, by switching to this standard from a lesser suitability standard, many retirement advisors will have to adjust the way they do business.

Ironically, with such drastic changes due to take place, Norm Champ believes many unintended negative consequences will end up falling on the investors' shoulders.  "Unfortunately, I think that broad impact is going to have the effect of lessening the services that are available to retirement investors in the United States," Norm explains.  "I think smaller investors are the main victims of this rule because it's not going to be worth the time, the cost, the compliance concerns of those big firms to deal with very small accounts."

In addition to the end-user, the new ruling will affect the asset management industry as a large increase of assets will migrate from broker-dealer accounts to investment management accounts, resulting in a significant decline in the broker-dealer model.  While broker-dealers do charge commissions, they may in fact sometimes be a more efficient method for investors to receive advice.  As the influx of assets to investment management accounts grows, more and more of them will be shifted into passive, "safer" and cheaper products as advisors will fear the possible penalties they could face from any riskier, but possibly more beneficial, investment strategies.

As the new DOL fiduciary rule settles into place, the industry as a whole will have a better sense of what exactly the ramifications of this new ruling will be.  It may be too early to say for sure what will happen, but as with any large-scale industry-wide change, there are bound to be unforeseen and unintended consequences which may or may not be able to be ameliorated once the dust settles.

To watch this video and other informative videos on the new DOL fiduciary ruling, tune into Asset TV:   http://bit.ly/20BC4B8

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