5 ways the U.S. ruling will change your business

When the U.S. Department of Labor ruling goes into effect next year, how we do business will change dramatically. Here are the five things I see that will be most different:

Lawrence J. Rybka, J.D., CFP

1. Advisors will have fewer choices to offer their clients as broker-dealers and insurance companies create Best Interest Contract Exemption (BICE)-compliant offerings.
   
2. Even with this narrower set of products, advisors will have to get used to a fair number of transactions being rejected because someone at the broker-dealer or insurance company has to sign off on whether or not it is in the client’s best interest. Currently, it is rare for something to be sent back if the client understands it and it is suitable.
3. Advisors will have a lot more work than they do today just to make a presentation. After the rule goes into effect, advisors will need to get detailed, accurate information on costs and investment options if the money currently is in either a qualified plan or IRA. They will then have to create the needed comparison for the best interest and reasonable compensation tests.
4. Switching broker-dealers will become much harder for advisors. Those with large blocks of IRA customers will have two to three times the level of disclosure and paperwork if they wish to move to another broker-dealer.
5. We have already discovered there are three or four existing exclusions in most Errors and Omissions insurance contracts that may prevent many of these future DOL claims from being covered. I am far less concerned about the cost of the coverage going up than I am of being covered.

Written by Lawrence J. Rybka, J.D., CFP, president and CEO of ValMark Securities in Ohio.

For more resources
Getting ready to meet the new DOL regulations