'I'm done': U.S. wealth managers may call it quits over regulatory load

[June 08, 2016]  By Elizabeth Dilts

NEW YORK (Reuters) - Some U.S. financial advisers are so fed up with regulatory red tape, they may opt for early retirement, the head of Boston Consulting Group's wealth management group said Tuesday.

"We expect to see a lot of advisers say, 'I'm done,' – just retire instead of dealing with the additional regulatory pressure," Brent Beardsley, global leader of Boston Consulting Group's asset and wealth management division, said at an event to promote a report on the state of the industry.

In recent years, U.S. regulators have taken a much closer look at the way wealth managers invest client money, the types of products they sell and the disclosures they provide. As a result, it has gotten harder for advisers turn a profit working with small customers, Beardsley said.

Of particular concern is a rule unveiled by the U.S. Department of Labor in April, which will require wealth managers to put clients' best interest ahead of profits when it comes to retirement accounts.

Known as the "fiduciary rule," it will also limit on the types of products advisers can sell and require them to make certain disclosures once it goes into effect in 2018.

Additionally, the Financial Industry Regulatory Authority is trying to root out problem brokers by analyzing data it collects.

This week, Massachusetts' top securities regulator said he has sent an inquiry to firms in an effort to root out "rogue" advisers.

Although the new rules and crackdowns are aimed at helping small investors, wealth managers and trade groups have said compliance is getting so expensive they will have to get rid of smaller customers who do not generate enough revenue to justify their cost. Advisers also complain that reams of red tape are getting in the way of generating income for customers.

Boston Consulting Group's report showed revenue made from client money at big U.S. banks' wealth management divisions fell twice as fast as costs between 2012-15 because legal and compliance costs doubled.

The report predicted wealth management revenue will continue to fall in the near term as banks and financial advisers adapt to the Labor Department's rule and others.

A similar trend was seen in the UK after it instituted the Retail Distribution Review rule in 2012, Beardsley said.

"In the UK, it no longer became affordable to serve (smaller clients) and millions of advisers retired," Beardsley said. "That's very possible to happen in the U.S."

(Reporting By Elizabeth Dilts; Editing by Lauren Tara LaCapra and Cynthia Osterman)

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