DOL fiduciary rule’s unintended consequence: higher fees for investors

September 19, 2016

DOL fiduciary rule’s unintended consequence: higher fees for investors

As broker-dealers move toward uniform commissions to comply with the Labor Department rule, investors could end up paying higher prices than in an unregulated environment

Sep 16, 2016 @ 11:37 am | By Bruce Kelly | Investment News

As broker-dealers adjust to the new Department of Labor fiduciary rule by instituting uniform commissions on a wide swath of investments, investors could be faced with higher prices on some investment products.

LPL Financial, the nation’s largest independent broker-dealer, is instituting new uniform pricing rules for alternative investments such an nontraded real estate investment trusts that could actually increase the initial price for some investments on its platform.

For example, Carey Watermark Investors 2 Inc., a nontraded REIT managed by W.P. Carey, has an upfront commission of 2% on its T shares, according to its prospectus. Under LPL’s new pricing policy for alts, the upfront commission to the broker on T shares, the only nontraded REIT share class that will be allowed on LPL’s platform in the future, will be 3%. To remain on the platform, Carey would have to increase the upfront commission, and thus the price, on the REIT an additional percentage point.

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Ramón A. Rivera-Ramos
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September 1, 2016

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