The fallout from the U.S. Securities and Exchange Commission's recent recommendation of a uniform fiduciary standard rolls on. As dates for hearings hang in the air, so do the possible effects on the wealth management industry.

The SEC study called for broker-dealers to comply with standards similar to those in place for investment advisors under the Investment Advisers Act of 1940. The goal is to increase investor protection, and create a more understandable landscape. But the staff report's recommendation was not concrete-two SEC committee members submitted dissent opinions, citing risks to investors.

Clues of possible effects came in February as Wells Fargo's head of brokerage operations said the fiduciary standard would limit the number of investment products available to clients. Wells Fargo currently offers some 6,000 mutual funds, but a potential downshift could come as the need for due diligence would increase. Those comments from Wells Fargo Senior Executive Vice President David Carroll were reported by Bloomberg.

Less investment choice could be a real possibility as both selections and pricing come under scrutiny, according to Ira Hammerman, senior managing director and general counsel for SIFMA. That is not to say that the changes will totally alter industry standards.

Even at this preliminary stage the SEC report has "very good language" about preserving business model neutrality, including commission business and proprietary products, Hammerman says. "Depending on how the rulemaking unfolds and the level of detail and the procedure that firms will have to follow, then of course a consequence could be a reduction in products, services and pricing model," he says.

But how would a decline in the number of products available affect firms and advisors? The overall result actually could be positive for both efficiency and profitability, says Scott Smith, an associate director at Cerulli Associates, a financial services industry research firm. "At what point is enough? Are there really 6,000 unique strategies out there?" Smith says of the numerous products sold. "And at some point, I just think having access to all those is more confusing."

Research on defined contribution has shown that investors tend to give up when presented with 401(k) plans with more than 15 investments, Smith says. Firms can use the new changes to their advantage if they whittle down investment options-say, from 6,000 mutual funds to 600, he says.

Such a move could boost profits and advisor productivity. "In many cases it may allow [firms] to increase their profitability by not having to support their alliances with hundreds of unique investment providers," Smith says. "Choice is good, but at some point a multitude of choices just become disabling to many advisors."

A decline in the number of financial products sold will also benefit consumers, which is the point of the Dodd-Frank legislation, says Barbara Roper, director of investor protection at the Consumer Federation of America.

"There are some really high- cost variable annuities, or mutual funds with really high costs and poor performance, that a broker would have a very hard time justifying under a fiduciary duty," Roper says. "It is a benefit to investors if those products disappear from the marketplace."

Some firms in certain areas of product distribution should be more careful as the changes for the fiduciary standard are considered, Cerulli's Smith says. That particularly goes for insurance broker-dealers or broker-dealers with an affiliated asset management arm.

Some firms are dealing with inventories that put them at risk for conflicts of interest every day, by having direct market involvement with initial public offerings or stocks or bonds related to the products they also sell. Those conflicts need to be considered thoroughly in the fiduciary standard talks, Smith says.

Right now, firms are also likely keeping their eyes on how a fiduciary standard could affect their operations from a technology perspective, says Peter Delano, research operations director at financial services research firm TowerGroup.

If a new fiduciary standard leads a firm to change its brokerage accounts to advisory accounts, for instance, it will lead to a major technology conversion. But firms are waiting to see how the undefined options play out before making concrete changes, he says.

That changeover from brokerage accounts to advisory accounts is just one possible outcome outlined in the SEC's report, Delano says. A new standard could also lead to broker-dealers continuing to offer brokerage accounts, or providing some of the services broker-dealers now provide through a third party.

While much is still unknown, many firms have stood behind the idea of a uniform standard and a greater priority for consumer interests.

Morgan Stanley Smith Barney, one of the largest players in the industry, is one example. Many of its advisors are dually registered as broker-dealers and investment advisors, says spokeswoman Christy Pollak. As such, they are already following the existing fiduciary standard in at least some of their practices. Still, she says, the rulemaking process is very preliminary. "It would be pure conjecture at this point regarding what changes may be required," Pollak says.

Pending talks toward a final outcome for the legislation have left both trade organizations and regulatory bodies scrambling to have their voices heard.

That includes the Financial Industry Regulatory Authority (FINRA), which could take on a greater oversight role as a self-regulatory organization for advisors and brokers, as well as the SEC, SIFMA and the Financial Services Institute, (FSI), an industry group representing mainly independent advisors.

FSI advocates a uniform fiduciary standard, says David Bellaire, FSI's general counsel and director of government affairs. The group is persisting in its aggressive lobbying efforts that began in the wake of the Dodd-Frank legislation, continuing to submit comment letters, hold meetings with SEC commissioners and talk with members of Congress.

FSI's worry with the pending new standard is that it could adversely affect costs to consumers as they work toward retirement and other goals, Bellaire says. "We do have concerns about how it is implemented because we want to make sure that we don't limit investor access to products and services by unnecessarily jacking up the cost of compliance."

Congress should be next to take the stage for events surrounding the rulemaking process in the fiduciary debate. Definite hearing dates are still up in the air while other Dodd-Frank issues could take precedence.

SIFMA thinks any landmark changes should take time. "You've had advisors and brokers since the '30's and '40's operating under a particular regulatory regime," Hammerman says. "Let's [develop a new fiduciary standard of care] in a smart way to avoid unintended consequences because literally trillions of dollars of customer assets are at risk."

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