What does the U.S. election mean for approaching regulation?

By now you surely know that the U.S. Department of Labor’s new fiduciary rule, primarily pertaining to advisors acting in the best interest of the client, becomes applicable April 10, 2017, which is approaching fast.

What no one knows for sure is what the election of regulation opponent Donald Trump will mean for the controversial rule. Will it be delayed (as a federal judge in Texas recently determined for the DOL’s proposed overtime-related change to the Fair Labor Standards Act)? Changed? Struck down? Moved forward as planned? Influencers are lobbying on both sides, and the possibilities are varied and complex. At this point, educated guesses are guesses nonetheless.

Regardless of this uncertainty, all advisors should think about the anticipated rule like a probable move, said Lawrence J. Rybka, CFP, the president and CEO of ValMark Financial Group and an outspoken challenger of what he sees as “subjective standards” in the DOL rule. Rybka noted that when a move is significantly likely, no one would want to be stuck throwing everything into boxes at the last minute, and there is still a lot of value in dividing content into piles marked “keep” or “trash” — with thoughts on how to redecorate.

Here are some of the ways Rybka recommended sorting through your business to enhance your practice, whether or not there winds up being a rule with which you need to comply.

Keep

—  Planning and modeling clients’ retirement cash flow, particularly reviewing commission-based accounts that would be impacted by the rule

—  Identifying clear expectations in engagement letters with clients and maintaining ethical standard of acting in the clients’ best interest

—  Discussing compliance plans regularly with your company or broker-dealer

Trash

—  One-size-fits-all selling (pushing the same type of product for all clients) and over-concentration of clients’ assets in a single product

—  Recommending illiquid investments

—  Hiding costs and product limitations from clients by only telling them the positive attributes

Recommended redecorating

—  Offer distinct service models for clients (Gold, Silver, Bronze) with consistent fees

—  Benchmark fees and services, and increase disclosure of what the client is paying currently vs. what is proposed

—  Be clearer about what ongoing services they can expect

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