DOL Fiduciary Rule and ETFs Tackled at TDA Conference

Salim Ismail, Founder and Chair of ExO Works, delivers his keynote address at the TD Ameritrade National LINC 2017 conference. (LILA PHOTO for TD Ameritrade Institutional)

Financial advisors and industry experts gathered at the annual TD Ameritrade National LINC 2017 conference this week, where panelists mused over exchange traded funds’ role in the markets today, including a look at Department of Labor rule and its impact on the investment process.

At the National LINC 2017 conference, many digested President Donald Trump’s latest plans at rolling back the Obama-era retirement-savings rule that was on track to take effect in April. Republicans and some financial-industry executives previously argued that the new DOL rule would have done more harm to consumers than good.

The proposed DOL rule would have held brokers and advisors who work with tax-advantage retirement savings to a fiduciary standard, compared to the previous suitability standard. Consequently, it will require the industry to work in the best interest of their clients and generally avoid conflicts, which would have come with the commission-based compensation common among many agents.

Trump’s directive would put off the April 10 implementation deadline and prevent the rule from taking effect.

Skip Schweiss

Skip Schweiss

The president’s action “will probably lead to a delay at least,” Skip Schweiss, president of TD Ameritrade Trust Co., told CNBC at TD Ameritrade’s National Linc conference in San Diego.

The DOL rule would have provided greater clarity on the high costs of active management in retirement accounts, which would potentially push more investors toward low-cost, index-based alternatives, such as ETFs, to gain market exposure.

While Trump’s actions mires the outlook on the DOL rule, ETFs may still continue to flourish.

“CFRA expects continued adoption of low-cost index-based ETFs and mutual funds to persist even if the DOL rule is halted or delayed,” Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, said in a note. “In the last few years, many advisors have voluntarily shifted to a fee-based business over commissions and many brokers are encouraging this trend. Expensive and underperforming funds are harder to justify inside client portfolios.”

For more information on the ETF industry, visit our current affairs category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.