The impending fiduciary rule is looming over the money management industry, which experienced a mixed performance in the first quarter.
Although the Department of Labor rule — which expands the definition of fiduciary investment advice but clarifies that plan sponsors can continue to provide education without triggering fiduciary duties — won't go into effect until next year, it was “one of the most, if not the most, popular topics on earnings calls,” said Christopher Shutler, a Chicago-based equity analyst with William Blair & Co., in an interview.
Though it is still “too early to tell what the impact will be,” Mr. Shutler said he believes the new rule “will continue, if not accelerate, some of the trends” in money management.
Those trends include moves toward lower fees, institutional share classes, passive investing and fee-based accounts.
Robert Lee, an analyst and managing director with Keefe Bruyette & Woods Inc. in New York, said the fiduciary rule will affect money managers, but it will do so “in a derivative fashion” in most cases.
“I'd say it's generally a negative for many managers, but you can't really quantify it. The costs will be much more onerous on distributors,” Mr. Lee said in an interview.
“A lot of managers have struggled to generate organic growth, so it's just another headwind for many of them,” Mr. Lee added.
Managers are currently assessing the impact of the new rule and how they will adjust.
Marianne Lake, New York-based chief financial officer at J.P. Morgan Asset Management parent J.P. Morgan Chase & Co., addressed the DOL's final fiduciary rule in an earnings call on April 13, telling analysts “it's a long and complex set of requirements” that “will take time to fully digest.”
Ms. Lake noted that upon first read of the rule, she saw “no significant new provisions from the proposal” that would change J.P. Morgan's position of having been “a fiduciary for over 150 years.”
JPMAM reported $1.676 trillion in assets under management as of March 31, down 3% from Dec. 31 and down 5% from March 31, 2015. Net outflows for the quarter were $47 billion.
In a conference call to investors on April 14, BlackRock Inc. Chairman and CEO Laurence D. Fink said the DOL's fiduciary rule “has implications for both our clients (and) in our own business,” and the firm was “reviewing the final rule to thoroughly assess its implications.”
Ultimately, Mr. Fink said it is likely that, as a result of the rule, BlackRock will see changes in its “distribution partners' accounts and fee structures, their product preferences and ... use of technology to both build portfolios for clients and to manage their increased risk and ... compliance needs.”
BlackRock's assets totaled $4.737 trillion as of March 31, up 2% from three months earlier but down 1% from a year earlier. Net inflows to BlackRock's long-term strategies for the first quarter were $36.1 billion.