3 simple steps to prepare for regulation

As the applicability date of April 10, 2017, approaches for the U.S. Department of Labor’s fiduciary rule — a complex regulation change that can broadly be summarized by requiring all advisors to be a fiduciary and act in their clients’ best interests — neither the status of the rule nor the future landscape of the country’s financial services profession has become clearer.

Yet amid President Donald Trump instructing Department of Labor officials to re-evaluate the rule and those officials now considering relief for potential compliance violations that could occur for institutions due to uncertainty regarding if and when an extension of applicability (to June 9) will be implemented, one thing remains difficult to deny: Advisors need to take action now and not wait until the proposed full implementation date of January 1, 2018.

Ernest Guerriero, CLU, ChFC, director of technical education for the American Retirement Association and a board member of the Society of Financial Service Professionals, has seen a lot of confusion from advisors around the country. They are unsure about how broker-dealers and financial institutions will deal with potential consequences of the rule, including increased paperwork, added time working with clients, questions regarding a variety of disclosures, and business sustainability in a compliant office. To say nothing of additional rules from the Securities and Exchange Commission.

“I feel it boils down to education and coaching clients and full disclosure,” Guerriero said. “It always has been about full disclosure about how the advisor gets paid.”

Here are three things Guerriero suggests advisors should do now to adjust, whether the regulation comes now, later or not at all:

  1.      Fully analyze your current business model. Break down who your clients are, what products and services you’re providing these clients and who you’re doing business with. If you’re working with multiple vendors, should you focus on fewer of them so you can emphasize higher quality relationships? Get a clear sense of what your broker-dealer or financial institution plans to do, and how that aligns with your interests.
  2.      Ask yourself what you want to do. Do you want to be in this environment? How will you involve your team in the discussion about acting in the client’s best interest? How do you picture your practice one, three, five and 10 years down the road? Do you have a succession plan?
  3.      Communicate with clients. This is not just for top-priority clients, but all of them. Educate them on what is occurring in your world and how it will impact them. Get feedback on how they want to be treated.

Plus:

— Learn more about preparing for the rule with this regulatory change checklist

— Hear how advisors from the U.S., U.K. and Australia adapt to regulation in episodes one, two and three of our DOL-related podcast series

Written by Matt Pais, MDRT Content Specialist

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