On April 10, 2016 the DOL finalized its Conflict of Interest Rule, which re-defines the term fiduciary for the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986. This paper will explore the basics of the rule, and look at potential effects on the ETF industry.
In the years since the 2008 financial crisis we have witnessed historic economic, market and regulatory changes on a global level. The rapid flow of regulatory initiatives has been transformational on the financial industry, having touched every aspect from money market fund reform to the way we look at liquidity.
Most recently, the Department of Labor’s Conflict of Interest Rule is re-defining the term “fiduciary” and could profoundly change advisory firms’ business models and advisory strategy. While the rule may initially apply to retirement accounts, the implications will potentiality affect all accounts. Independent broker dealers, RIAs and advisors are currently the main focus in regards to the effect of the DOL Rule, though in reality it will affect the entire industry — from products to distribution to servicing, including the exchange-traded funds (ETFs) marketplace. The fiduciary standard embodied in the DOL Rule is expected to accelerate ETF growth beyond its current trajectory.
Specifically, it is expected that the fiduciary standard will lead advisors and institutions to:
To help understand the impact of the DOL ruling on advisors’ use of ETFs, BNY Mellon, in conjunction with ETF Trends, conducted a survey of 170 advisors. This paper outlines the survey results, and explores the effects of the evolving ETF industry.
Topics covered in this paper:
This content is part of BNY Mellon’s Focus on Regulation Readiness, a dedicated section on bnymellon.com that showcases regulatory and policy related content. BNY Mellon understands the regulatory realities and can help you keep pace with the changing environment.
BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may be used as a generic term to reference the corporation as a whole and/or its various subsidiaries generally. This material and any products and services may be issued or provided under various brand names in various countries by duly authorized and regulated subsidiaries, affiliates, and joint ventures of BNY Mellon, which may include any of the following. The Bank of New York Mellon, 225 Liberty St, New York, New York 10286 USA, a banking corporation organized pursuant to the laws of the State of New York, and operating in England through its branch at One Canada Square, London E14 5AL UK, registered in England and Wales with numbers FC005522 and BR000818. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the US Federal Reserve and authorized by the Prudential Regulation Authority. The Bank of New York Mellon, London Branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. The Bank of New York Mellon SA/NV, a Belgian public limited liability company, with company number 0806.743.159, whose registered office is at 46 Rue Montoyerstraat, B-1000 Brussels, Belgium, authorized and regulated as a significant credit institution by the European Central Bank (ECB), under the prudential supervision of the National Bank of Belgium (NBB) and under the supervision of the Belgian Financial Services and Markets Authority (FSMA) for conduct of business rules, a subsidiary of The Bank of New York Mellon, and operating in England through its branch at 160 Queen Victoria Street, London EC4V 4LA, registered in England and Wales with numbers FC029379 and BR014361. The Bank of New York Mellon SA/NV (London Branch) is authorised by the ECB and subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority. Details about the extent of our regulation by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request. The Bank of New York Mellon SA/NV, operating in Ireland through its branch at 4th Floor Hanover Building, Windmill Lane, Dublin 2, Ireland, trading as The Bank of New York Mellon SA/NV, Dublin Branch, which is authorised by the ECB and registered with the Companies Registration Office in Ireland No. 907126 & with VAT No. IE 9578054E. If this material is distributed in, or from, the Dubai International Financial Centre (“DIFC”), it is communicated by The Bank of New York Mellon, DIFC Branch, which is regulated by the DFS and located at the DIFC, The Exchange Building 5 North, Level 6, Room 601, P.O. Box 506723, Dubai, UAE, on behalf of The Bank of New York Mellon, a wholly-owned subsidiary of The Bank of New York Mellon Corporation. The Bank of New York Mellon, Singapore Branch, subject to regulation by the Monetary Authority of Singapore. The Bank of New York Mellon, Hong Kong Branch, subject to regulation by the Hong Kong Monetary Authority and the Securities & Futures Commission of Hong Kong. If this material is distributed in Japan, it is distributed by The Bank of New York Mellon Securities Company Japan Ltd, as intermediary for The Bank of New York Mellon. Not all products and services are offered in all countries.
The information contained in this material is intended for use by wholesale/professional clients or the equivalent only and is not intended for use by retail clients. If distributed in the UK, this material is a financial promotion.
This material, which may be considered advertising, is for general information purposes only and is not intended to provide legal, tax, accounting, investment, financial or other professional advice on any matter. This material does not constitute a recommendation by BNY Mellon of any kind. Use of our products and services is subject to various regulations and regulatory oversight. You should discuss this material with appropriate advisors in the context of your circumstances before acting in any manner on this material or agreeing to use any of the referenced products or services and make your own independent assessment (based on such advice) as to whether the referenced products or services are appropriate or suitable for you. This material may not be comprehensive or up to date and there is no undertaking as to the accuracy, timeliness, completeness or fitness for a particular purpose of information given. Some information contained in this material has been obtained from third party sources and has not been independently verified by BNY Mellon. BNY Mellon makes no representation as to the accuracy or completeness of such information. BNY Mellon will not be responsible for updating any information contained in this material, and opinions and information contained herein are subject to change without notice. BNY Mellon assumes no direct or consequential liability for any errors.
© 2016 The Bank of New York Mellon Corporation. All rights reserved.