Incoming fiduciary standards likely to level commissions

By National Underwriter

National Underwriter


By Warren S. Hersch

Fiduciary standards being considered by the Securities and Exchange Commission (SEC) and the Department of Labor will likely lead to a leveling of advisor commissions, according to a new report.

The Aite Group reaches this conclusion in a study that forecasts the top 10 trends that will shape the wealth management field in 2013.

The report forecasts that the SEC forthcoming fiduciary standard will lead to a more uniform or level commission structure to reduce or eliminate advisor product bias. More advisors will also adopt a fee-for-service model (mostly likely based on assets under management) to cover the higher costs of delivering fiduciary level advice.

And more firms will leverage online platforms to offer self-service capabilities to clients and to lessen the client data-gathering/updating burden of financial advisors.

In light of both the SEC and DOL fiduciary proposals, the study recommends that registered advisors adopt tools to create an audit trail of their advice and recommendation processes, as regulatory oversight of fiduciary practices is expected to intensify in 2013.

Among the report's additional findings:
  • The largest wealth management firms will pursue growth by acquiring firms or by growing organically.

  • Registered investment advisors will endeavor to become more operationally efficient. Contributing to the trend will be the acquisition of independent RIAs by "roll-up" firms that will help the acquired firms implement new technology and best practices.

  • Exit planning will become a top issue for the more than 40 percent of advisors, among them soon-to-be retiring baby boomers, who currently lack a succession plan.

  • Wealth management firms will seek to growth by providing differentiating and revenue-enhancing services to clients or by reducing the cost of serving clients.
Originally published on LifeHealthPro.com