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By Anna Irrera and Elizabeth Dilts
NEW YORK Feb 14 As century-old Wall Street
brokerages have agonized over the fate of a major U.S.
regulation on retirement advice, younger Silicon Valley
counterparts have coolly shrugged their shoulders.
At issue is when and how the federal government will
implement the so-called "fiduciary rule" handed down by the U.S.
Labor Department last year.
The rule, which aims to protect retirees by eliminating
conflicts of interest for the brokers paid to advise them, was
set to go into effect in April, but is being challenged by the
The rule is now on track to be delayed by 180 days -
creating a great deal of uncertainty about its future.
Big wealth managers and insurers most affected by the rule
have welcomed signs that the new White House may roll it back.
They have fought hard against the rule in court and on Capitol
Hill, arguing that it would raise compliance and technology
costs, while restricting brokers' ability to charge commissions
and sell certain high-fee products.
Critics have said the additional costs would force
brokerages to dump less well-heeled clients in favor of
Startups offering digital wealth management services have
taken the opposite tack, saying the rule would benefit retirees
and their own businesses. Investors abandoned by big firms might
move to digital providers, which offer transparent, lower-cost
alternatives, the thinking goes.
In interviews since Trump instructed the Labor Department to
review the rule earlier this month, executives at
"robo-advisers," which manage investor money with algorithms,
brushed off the impact of the rule on their business.
Although the rule might have sped up a broader shift of
investor money to "robo-advisers," the trend had been gathering
momentum anyway, they said.
"An expansion of the fiduciary rule would be nice for our
business, but in no way affects our ultimate success," said Andy
Rachleff, chief executive officer of Wealthfront, one of the
largest robo-advisers that deals directly with investors.
Wealthfront competitor Betterment has encouraged Democrats
in recent weeks to fight efforts to delay or gut the rule.
Nonetheless, Betterment's Associate General Counsel Seth
Rosenbloom said any regulatory changes would have little impact
on the company's growth.
"We are sad that it looks like ... the rule might go away,
be delayed or watered down," Rosenbloom said. "But we are
optimistic that the attention around the issue will make for
better informed investors in the long run."
Among robo-advisers that provide services to brokerages,
Mike Sha, co-founder and chief executive of robo-adviser SigFig,
said he did not expect the rule's delay to impact its business
or partnerships at all. Wealth units of Wells Fargo & Co
and UBS Group AG use SigFig's technology and offer its
online investing tools to their clients.
Robo-advisers represent a small piece of the wealth
management industry, overseeing roughly $200 billion of client
assets in 2016, according to consulting firm A.T. Kearney. It
expects the total to surge to $2.2 trillion by 2020.
Interrupting the fiduciary rule could slow that growth for
some companies. Last week, for instance, LPL Financial Holdings
, said if the rule was delayed, it might move more
slowly in rolling out some compliance plans, which include its
robo-adviser and other new technology.
But the shift to less expensive digital options began before
the rule was formalized, driven primarily by customer demand for
more digital options. That trend is unlikely to be stopped with
or without the rule, analysts said.
"By all projections, there is unbelievable demand for
digital advice and solutions," said Kendra Thompson, a managing
director in the financial services group at the consultancy
Accenture. The rule is "an accelerator for digital, not an
originator," she said.
(Reporting by Anna Irrera and Elizabeth Dilts in New York;
Editing by Lauren Tara LaCapra and Richard Chang)