Advisor Login Contact Us

DOL Fiduciary Rule Levels the Recruitment Playing Field Between Small Firms and Wire House Broker Dealers

When the Department of Labor (DOL) announced its new final fiduciary rule, intended to help ensure that Americans get investment advice that is in their best interest, a portion of the 1000-plus page document cited references to “recruitment compensation.”  This phrase refers to the lucrative bonuses advisors receive as an enticement to leave their current firm and join another.

This is not the first time regulators have expressed concern over recruitment incentives.  The Financial Industry Regulatory Authority (FINRA) has recently made efforts to require disclosure of said incentives to customers as part of the transfer process, but to date, those efforts have not made their way through the rule-making authority board.

Under the new DOL standards, traditional and independent advisors switching firms and receiving a large upfront check to do so may be required to justify that move as it applies to retirement accounts, meaning the burden of proof would be on advisors to demonstrate how their customers will benefit from an advisor’s decision to change firms.

This could forever change the way companies hire financial advisors.  In an ever-increasing competitive recruiting environment, the cash sign-on bonuses offered by large banks and wire house broker dealers have soared to astonishing highs. Those checks, however, come with pressure to meet ambitious production goals.  Furthermore, advisor payout grids are often tied to certain product types, meaning that advisors earn more when selling specific products—a model that will further challenge those seeking to justify how their customers benefit from a firm change.

Return To Index Page

About Capitol Securities Management, Inc. Capitol Securities Management, Inc. is a Mid-Atlantic based, regional brokerage and investment advisory firm with locations from New England to Florida and has been serving the needs of its clients and advisors since 1985. Capitol Securities has a clearing relationship for its clients' accounts, products, services, and technology with Raymond James. It is a member of FINRA and SIPC. For more information on Capitol Securities and its holistic, client centered, platform and services. www.capitolsecurities.com or call Brad Kimball, National Business Development Director at (857) 343-2316. bkimball@capitolsecurities.com