Streamlined brokerage platforms may be the way of the future, and the Department of Labor (DoL
) may be at least partly to blame.
| Daniel R. Kleinman|
That's one prediction offered up by both panelists and fundster attendees today at the Investment Company Institute's (ICI's
) special "Assessing the New DOL Fiduciary Rule: Policy and Practical Challenges" conference at the JW Marriott in Washington, D.C. Fundsters wonder if broker-dealers facing the new fiduciary rule will try to better levelize their compensation by, among other things, levelizing platform fees for mutual funds.
, a partner at Morgan Lewis Bockius
and a panelist in the one-day conference's "Fund Distribution Under New Fiduciary Paradigm" panel, says that B-Ds would like to simply say, "if you'd like to be on our platform, you need to pay X." No more X for you, and Y for you, and just A for you because you're extra special or popular or will do lots of other support. Other fundsters in attendance tell MFWire
that they, too, are hearing B-D interest in such an idea.
Another possibility, addressed by Kleinman and fellow panelist Yaqub Ahmed
(head of defined contribution - U.S. at Franklin Templeton
), is that some B-Ds might just use the most stripped-down share classes possible and then layer on their own fees on top.
"The broker-dealers are trying to move to a model where they're completely level at the firm level but also at the advisor level," says Joseph Lai
, associate partner at McKinsey
. And the DoL regs include a "pretty expansive definition of what those third-party payments include", such as conference sponsorships, seminars, and of course revenue sharing.
, president of OppenheimerFunds Distributor
, moderated the panel discussion.
The good and bad news is that it's early days. That means no one really has any answers or certainty yet.
"It is a mad scramble right now," Ahmed says.
Yet that scramble can also be an opportunity, Ahmed says, for the asset managers will to step up and help out their key B-D allies by making "calculated risks."
"Talk to your clients right now," Ahmed says. "We're very focused on our platform team. The platform inventory at the large B-Ds is likely to shrink over time."
"Reach out to your intermediaries," Kleinman says. "Ask them what they're doing. Tell them that you want to be a partner."
Correction: A prior version of this story gave the wrong title for Yaqub Ahmed. He is head of defined contribution - U.S. for Franklin Templeton.
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