DOL Changes: What You Should Do First

DOL Changes: What You Should Do First

“Everyone has a will to win; few have a will to prepare to win.”

–Bob Knight, former Indiana Hoosiers basketball coach

With the new U.S. Department of Labor (DOL) rules coming into effect next year, many financial professionals are asking, “What do I have to do to comply?” I think the better question is, “What should I be doing to prepare?” Instead of solely focusing on what you must do, go a step further. Determine how you can enhance your business to not only comply, but also excel above the competition.


Critical Success Factors in Future Business Models:

  • Compensation regimes must remain as neutral as possible – All revenue should be paid through an established grid so consumers are confident that conflicts are reduced.

  • Products with classes must become more uniform – The DOL recognizes the time and effort devoted to some sales cycles for more complex and best interest sales. Differential compensation must be set by class, not individual product. Furthermore, all of us will need to work with smaller margins.  

  • Conflicts of interest must be eliminated – Metrics such as highly concentrated positions, high placement ratios of product classes, and repetitive solutions must be addressed.  

  • Distribution systems like career agencies add value in the oversight of producers – It’s essential to know your client, agents and brokers in a fiduciary environment. Highly structured general agencies and Offices of Supervisory Jurisdiction provide value and confidence when executed properly.

  • The fear of disclosure must be abandoned – As an advisor, during your recruitment process you should educate your clients about disclosed information, including your commissions and overall revenue into your firm. As a business owner, you shouldn’t feel violated by the requirement to discuss your compensation regimes and business models. Your clients will appreciate learning why, how, what it takes to serve them with honesty and loyalty.  

  • We have to keep our curiosity – You must abandon your old biases in the former “suitable world” and remain open to different classes of assets and solutions to innovatively solve client needs.  

While many uncertainties about the new rule remain, the DOL has indicated its willingness to provide guidance throughout the implementation period. However, the six items above will serve as a foundation for thought and action as the specifics are gradually clarified.

Winning Strategy:

Preparing to win is more important than the desire to win. Use the DOL’s implementation period to assess your business model and develop new strategies to deliver meaningful client solutions. Focus on improving methods of distributing products and services for future success.


About the Author

Mike McGlothlin is the Executive Vice President of Annuities at Ash Brokerage. His strength is helping advisors become more efficient and effective in their businesses. He and his team provide income-planning solutions focused on longevity and tax efficiency, and they also assist advisors with entering defined-benefit termination planning and structured settlement markets.