What It Costs To Comply With The DOL Fiduciary Rule

The new U.S. Department of Labor (DOL) fiduciary rule is quickly revealing itself to be the most impactful regulation in the financial services industry in a long time. The investments that companies are needing to make in order to comply with the rule, which focuses on conflict of interest, are making the impact painfully clear.

InvestmentNews recently cited several examples of what companies have publically shared about their fiduciary rule compliance investments.

Primerica, a leading distributor of financial products, believes it will spend between $4 million and $5 million every year to keep compliant with the rule. That's in addition to the $8 million it expects to dish out between now and the end of 2017.

“We expect to incur substantial implementation costs for consulting, legal guidance, sales force training and technology platforms over the course of the implementation period,” said Alison Rand, chief financial officer, Primerica.

Ameriprise Financial, a financial services firm with a network of 10,000 financial advisors and extensive wealth management and asset management capabilities, has already spent $11 million on DOL-related compliance activities during the first half of 2016.

Principal Financial Group, a company with retirement, insurance, and asset management solutions, not to mention $572.2 billion in assets under management, commented that it will likely spend between $18 million and $24 million over the next two years, and then an additional $5 million to $10 million, once the rule is fully in effect.

Cambridge Investment Research, an independent, privately owned broker-dealer with over 2,000 independent registered representatives and over $40 billion assets under management, believes it will spend $10 million by April 2017, when companies are expected to comply with portions of the rule.

The money is being spent in many areas of the business, but Primerica chief executive Glenn Williams provided one example: a “detailed matrix of the various points in our clients' investment decision process.” “This matrix will be used to develop operational processes and sales force training materials as well as point-of-sale technology added to the front end of our investment execution process to capture a client's decision points during the sales process and support necessary disclosures,” he said.

While some firms, like the ones mentioned above, jumped right into addressing the DOL rule, others are less clear on how to assess the rule’s impact on their operations.