Things Will Change


Things Will Change

I just left a well-attended broker-dealer roundtable, where the crowd was the largest in the semi-annual meeting’s history. The content was the likely reason – the meeting focused on the U.S. Department of Labor’s proposed Fiduciary Standards.  

The DOL’s proposal creates many obstacles for registered representatives. The Fiduciary Standard reaches many aspects of financial planning involving insurance and investment products. Past rules protecting the state regulation of insurance products are circumvented through tougher language focused on impartial and unbiased recommendations to the client.

While no one wants less than a best-interest-of-the-client philosophy in our industry, policing the standards and implementing consequences would be far reaching. Additional disclosures, reductions in revenues, likely minimum account balances, and retooling of existing products to meet mandates (and not consumer interests) may be required if the proposal is accepted in its current form.  

Clearly, as I have said many times in this blog, it’s time for our industry to change – to better itself – by developing innovative products, gaining a deeper understanding of our clients and securing income through more options. 

But, the end result of this proposal will be to eliminate the willingness of financial firms and their advisors to address the needs of middle Americans. This group needs professional advice more than any group in America right now. According to the American College’s Retirement Income Certification Program, 70 percent of middle Americans’ wealth is tied up in non-financial assets. That means the amount of financial wealth this group has must be used wisely and efficiently for the highest priority needs – guaranteed expense coverage. We must look at the best possible use of dollars and attempt to secure the best possible lifestyle and legacy. That’s their best interest. 

Additional paperwork doesn’t promise the best interests of the client. More importantly, leaving the policing of the Fiduciary Standard to litigation opens a door of responsibility that most firms will be unwilling to take in the future. I challenge all our advisors to pay close attention to these proposed regulations and change in procedures over the next 18 months. Be active in your professional organizations and local government bodies to voice your opinion. It might be the best practice management time you spend to protect your financial firm. 

Bottom Line: Our business is about to change. Can we stop the onerous regulation and have meaningful and impactful change to our clients?