Do you hear the whistle? That is the engine. The DOL train has left the station and I hope you are still on board.
As I write this on the weekend after President Trump may or may not have delayed the fiduciary rule. Frankly, I struggle to make sense of the competing headlines – is the DOL rule dead, postponed or still in effect? Will the rule be reviewed by the new Secretary of Labor and found to cause harm to the investor, or violate the new administration’s views on regulations and then killed or postponed? As you can imagine, social media is all over this, as are financial publications and every article I read.
But I keep coming back to the same thought… Who cares?
The cat is out of the bag. Elvis has left the building.
In our whitepaper, The DOL’s Game-changing Fiduciary Rule: What Should You Do?, Raef Lee and I argued that investors will be the ones to force the change of behavior in our industry. Educated by the press, government officials and fiduciary advisors (competitors), the consumer will start asking questions of their advisors. Questions like:
- Are you a fiduciary?
- How are you compensated – or better yet, who compensates you?
- Can you provide details on exactly what I pay in fees and what services you provide as part of those fees?
I have already seen it happening with interesting tweets highlighting the differences between a salesperson and a fiduciary. Some companies are stating on the record that they will continue with the move toward a fiduciary business, no matter what the final outcome of the rule.
I saw an interview with someone who said, “Why create a rule, then tell everyone how to get around it?” and went on about the importance of being a fiduciary. And lastly, I have seen members of Congress blasting the critics of the rule and imploring the larger firms to be seen as always putting their clients’ best interests first. They are framing the issue to the consumer – only hire fiduciary advisors.
You can’t put toothpaste back in the tube. And why bother closing the barn door after the horse has bolted?
Let’s choose to be practical. Going forward, whether the rule is in place or not, it will be very difficult to create a long-term business that is not a fiduciary business. It just makes sense to look at the future trends and begin shifting your practice towards the intent of the fiduciary rule (as of today, the rule is still scheduled to be in effect beginning April 10). So, what does that mean?
- Review your business. What will it look like 5 years from now? Would it survive if a new fiduciary rule was put in place? What if a new version, say one from the SEC, was created that affected your whole business, not just retirement assets? Do you think you would have wished you had made changes earlier?
- Assess and document. Look at your book for any piece of business that you are paid on that is not paid by your client. Document why it makes sense to keep or change the account to a new model. Put in place a timeline for those accounts that require changing and add the notes to your CRM. One day, the regulators, auditors – or more importantly – your clients, are going to ask you some difficult questions. By having a proven methodology and documented conversations, you alleviate some of the issues.
- Consider your offering. The fiduciary advisor in a fee-conscious world is going to have to go beyond investments. Comprehensive planning and advice, not one’s ability to pick the right mutual fund or correct asset allocation portfolio, will allow the fiduciary advisor to compete with the low-fee robo-advisors or commoditized salespeople. Look to delegate anything the client does not value or can get cheaper somewhere else. It just may increase the equity in your business too.
- Be on the right side of the conversation. I think the groundswell of opinion is only going to get bigger in the next few months. Advisors are going to be in the crosshairs of public opinion if the rule is postponed or killed. I can hear the media and your competitors say, “So you are against putting your clients’ best interests first?” Or, “So you have no obligation to act in the best interest of your clients?” Get in front of the conversion.
No time like the present
If you are a full fiduciary (as defined by the current DOL rule), get out there and have the conversation before the rule is even more in the public conversation. Shout it from the rooftops to all your clients and prospects. If only a portion of your book is fiduciary, start the plan to go all in.
The advisory business is at an inflection point. What got us here is not going to take us into the future. I believe it is time for change, what do you think?