Fiduciary Rule

Views Answering advisers’ urgent questions about DOL fiduciary rule

By John Anderson

Published April 1, 2016 11:34 AM EDT Updated April 1, 2016 3:29 PM EDT 5 Min Read

B – Bone up on the rule. Understand who it affects and how. Understand the idea of the exemptions (BIC) and what it will take.
A – Audit your book. Look at your last commission statement from your BD, custodian or Fund Company. Any qualified accounts, including IRAs? Any commission products inside those accounts?
S – Segment those accounts. My suggestion is to create 3 buckets (or tabs, if you are using Excel).
Tab 1: Clients you can and should move to an advice model (a fee model).
Tab 2: “On hold” clients. These are accounts where there is a surrender charge or another reason that you wouldn’t convert to fee. This is the tab where you are going to have to wait and see until the rule is in effect. But that doesn’t mean don’t talk to those clients until then.
Tab 3: “To be orphaned” or “Give to the fund family or custodian” accounts. This third group is the hardest — I have never recommended firing a client, but in this case, the accounts may be too small to be profitable and the risk is too high. We are going to have to find a solution for these guys and it may be an hourly rate or retainer that makes the account worth the advisers’ time and effort.
E – Educate and Execute. Educate your clients on the change and how it will affect them and your relationship. If you are already fee based on some accounts, educate those clients, too — take credit for what they will be hearing about soon. Educate yourself on your options. Look for platform partners who can help you with presentations, scripts proposals and paperwork. If you have a platform partner and a plan, execute the transitions. Get in front of the conversation. Frame the change as a positive. Reinforce your value proposition in every conversation.

Make the necessary changes to the proposal that would be required to make the rules workable
Make the costs reasonable (in light of the benefits the changes are supposed to provide)
Ensure that the law remains consistent with other bodies of law to which affected service providers are already living under

John Anderson

Managing Director of Practice Management Solutions

John Anderson is a managing director at Independent Advisor Solutions by SEI.

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