6 adjustments to help you comply with regulation

A lot of uncertainty remains with the U.S. Department of Labor’s fiduciary rule, intended to guarantee that all advisors act in the best interests of their clients. Steve Parrish, J.D., CLU, an adjunct law professor at Drake University and the American College with four decades in the financial services business, will be the first to recognize that.

“Whatever I tell you and a dollar still won’t buy you Starbucks,” he said, a reflection of the many theories, delays, and maybes that remain on the table about the rule, proposed to go into effect April 10.

But he also feels strongly that “It’s very difficult to put the toothpaste back in the tube,” and that, regardless of how the regulation fares, the time and money spent by many institutions to comply will mean big moves toward establishing trust with clients and society at large. At a recent estate planning conference, he saw the movement in action, regardless of the Department of Labor’s rule, for plaintiff attorneys to be the primary enforcers of best-interest expectations, suing clients’ advisors if they’ve done something allegedly inappropriate.

What should advisors do? Parrish, a contributor to the Journal of Financial Service Professionals, recommends these steps:

1.  Stay attuned to what your broker-dealer/financial institution is telling you. Each organization will handle the situation differently, and you need to make sure what they do and say is in line with how you want your practice to look and how you want to handle things moving forward.
2.  Likewise, take note of how colleagues are adapting. If you are doing joint work with someone who is not compliant, you could be liable for their mistakes.
3. Focus on how you recruit and delegate. “Traditionally advisors would hire someone by throwing them against the wall and seeing if they stick,” Parrish said. “That model just doesn’t work anymore.” Instead, make it a more gradual process so everything is understood and all rules are followed carefully by everyone in the office.
4.  Consider yourself a fiduciary regardless of what happens with the rule. “You’ve got home offices, attorneys and others that will hold your feet to the fire,” Parrish said. “Advisors have to start looking at their practices and saying, ‘How am I going to act as a fiduciary?’ not ‘How am I going to limit my practice so I’m not a fiduciary?’ Think of your role like an attorney, not a car salesperson. Clients expect you to offer what is right for them, not just push something that works for you.
5. Document your process thoroughly, and use technology. This way, among other efficiency reasons, if a legal issue comes up, you have a formal process to show how information was gathered and decisions were made.
6. Consider additional professional designations, which Parrish said is a good way to show the outside world that you’re acting in a fiduciary capacity. “Instead of figuring out how to get away from the rule, figure out what will happen in the rule. Designations and memberships will help,” he said.

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