An analysis of two surveys – one involving consumers and the other NAIFA members – shows that consumers with household incomes in the middle-market range represent a core client base of NAIFA members, and if a universal fiduciary standard of care is imposed under the Wall Street Reform law, many members would be forced to discontinue providing some services to middle-market clients.
According to the survey that polled 3,372 NAIFA members, most members involved in securities activities believe that the legal implications of a fiduciary standard will increase their compliance costs. If NAIFA members’ compliance costs go up 15 percent, 65 percent of NAIFA members said they would need to take action that could limit access to financial advice, such as:
31 percent say they would limit their practice to affluent clients only
20 percent would not offer securities to their clients
14 percent would increase fees for their clients (41 percent say “few,” “very few,” or “none” of their clients could absorb an increase).
The survey, which was conducted by LIMRA International on behalf of NAIFA, also found that one out of five members surveyed who were once licensed as a registered representative of a Broker-Dealer or as an Investment Adviser Representative said they gave up their registrations and no longer offer securities to clients, primarily due to existing compliance responsibilities. (The NAIFA members who are involved in securities say they and their staffs devote more than 525 hours and spend an average of almost $9,000 a year on compliance, according to the survey.)
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