Consulting Group Sees New Fiduciary Rule Ending The Existing Sales-Based Model

Thursday, March 31, 2011 05:50
Consulting Group Sees New Fiduciary Rule Ending The Existing Sales-Based Model

Tags: fiduciaries

Most people talking about the implications of a universal fiduciary standard have stuck to the short term. Financial Research Corp. recently went beyond the here and now to confirm a few suspicions.

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FRC, a Boston-area consulting firm, just put out a white paper laying out "big changes" ahead for the business if the fiduciary rule happens in anything like its currently proposed form.


Rather than see the death of the brokerage channel -- as both critics and fans of the rule have -- FRC takes a more realistic view of evolutionary change.


They see brokers who are suddenly assigned fiduciary responsibilities stepping up to turn that burden into an opportunity by making advice the center of their offering.


"Trade execution will be incidental to advice," FRC Chairman Bob Hedges concludes.


So if the SEC forces reps to live up to their firms' marketing and be advisors in fact as well as in name, then the old commission-backed trading relationship may not have long to live after all.


FRC sees a lot of asset managers getting into the act by bundling fee-based products and services into their existing product shelf. No sense of how this would work yet, but given the deep sales channels these massive companies have built up within the brokerage community, it makes a lot of sense that they'd evolve with the times.


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