Invesco Ltd. President and CEO Martin Flanagan said asset managers and brokers believe President Donald Trump's administration will delay the implementation of the Department of Labor's Conflict of Interest Rule, but the investment industry is still preparing to comply with the regulation.
"In some ways, I don't believe the fiduciary rule's going away," Flanagan said during an earnings call. "I think there could ultimately be some modifications and the [Securities and Exchange Commission] syncing up a definition of fiduciary rule."
Ahead of the April 10 implementation deadline for the fiduciary rule, some financial institutions have already announced that they will scrap commission-based accounts the rule targets. Invesco's unit investment trust business is witnessing the impact of this shift, as the segment saw outflows of $1.5 billion during the fourth quarter of 2016 after some of its distributors removed short-dated equity trusts from their platforms. But the asset manager hopes to blunt such negative impacts by focusing on exchange-traded funds.
The executive admitted that brokers are leaning toward asset managers with "competitive expense ratios," but he is not too worried about the ongoing efforts by asset managers, such as BlackRock Inc. and T. Rowe Price Group Inc., to court investors by lowering fees on investment products. About two-thirds of Invesco's products are already "in the lowest quartile of expenses," he said. Further, he does not believe that cutting expense ratios alone will help pull in investor money and maintained that investment performance continues to be the key driver for flows.