3 ways to prepare to meet the new DOL regulations

Caleb Callahan

You should begin preparing now for the vast changes the new Department of Labor fiduciary rule will bring, even though it doesn’t take effect until April 2017, said Caleb Callahan, chief operating officer of ValMark Financial Group. Here are three ways you can get ready now to comply when the rules go into effect. 

Take a close look at your business

Understand what portion comes from retirement plans versus nonretirement accounts, and what percentage is fee-based versus commission. “Then look at the actions we have to take to comply with these new regulations, for instance changing the compensation model,” Callahan said. “It’s clear from the rule as a whole that the DOL prefers fees to commission.” Read more about transitioning to a fee-based practice. 

Begin changing your documentation process

“You will have to build written plans that validate the advice you give. You have to do an analysis on the current holdings a client has before you advise on something new,” Callahan explained. “It’s a whole new level of documentation and planning. The process of gathering information during the fact find and conveying specifics in a written plan is something advisors need to be doing now, because when the final rule is effective, this will be critical to complying with the regulation.” 

Understand the implications of the grandfathering rule

The grandfathering rule allows advisors to maintain the accounts that are already in place, but if any additional deposits are made to those accounts, you lose the grandfathering. “If they want to make additional contributions, you’re conflicted from helping because the compensation is no longer allowed. You’re almost disincentivized from helping these clients,” Callahan said. That’s why it’s crucial to consider next steps immediately. “Between now and then, I’d be working double time to get clients into the kind of accounts you need them to be in, that are also in the best interests of the client.”

See 3 more tips from Callahan in the Resource Zone. Callahan will provide an in-depth look at the DOL rule at this year’s Annual Meeting. His presentation, “The DOL Game-Changer: What You Need to Know About the New Fiduciary Rule,” will be held June 14 from 2 to 3 p.m.

Article written by Round the Table Editor Liz DeCarlo. Blog post written by Matt Pais, MDRT Content Specialist.

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