DOL Fiduciary Rules and the Implications to Practice Management



April 13, 2016

 The Future of an Advisor’s Practice, Client Relationships and Asset Retention

With the new DOL Fiduciary requirements (“Fiduciary Rule”) being digested, the Financial Services industry is collectively working to comply with pivotal aspects of the rule. Teams of internal and external resources are working to get out ahead of a regulation that will surely change industry dynamics as much as the Affordable Care Act changed Healthcare. But, while these teams of strategic thinkers plot the big-picture course for their respective firms over the next 12+ months, what level of attention is being paid to the client experience? How firms provide their advisory organizations with the tools necessary to engage with prospects and clients in a meaningful and value-added way will be essential during this time of transition.

Practice management has traditionally been an all-in method for maintaining the health of individual advisory practices, and capabilities have seen recent improvements with process and technology enhancements. However, with the Fiduciary Rule now passed, firms across the U.S. should conduct an end-to-end review of their established practice management activities, in an effort to not only prepare their teams for the regulation, but also to strengthen client relationships and improve asset retention over time.

This can be done through two simple steps:

  1. Understand the implications of the Fiduciary Rule as it relates to how sales and service associates determine solutions and present advice to clients. The client experience is tantamount and will determine the winners and the losers of the fiduciary changes in 2016. Proactively work to identify the potential impact of the ruling on client experience and get your firm out ahead of these changes.
  2. Train your sales and service associates to proactively reach out to their existing clients now, addressing the rule head-on and transparently discuss how they plan to continue with the client’s best interest in mind. Your sales and service associates will need education, training, tools, and coaching on how to best have those conversations and clearly articulate their value proposition in the marketplace.

Practice management is commonly understood to be the preparation and processing of all business and operational tasks done while not in front of the client. However, there is a unique opportunity to use the DOL ruling to design and develop a holistic approach to practice management that works best for the firm, and its advisors and sales associates. Doing so will give your employees the opportunity to have comfortable conversations with their client base, reassure confidence or reestablish relationships with them, and in the long run, retain assets that could otherwise be lost to confusion or unpreparedness.

For more on how we can help, check out our Fiduciary Foundations page.

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  1. Jonathan Huffman
    Apr 25, 2016 - 01:00 AM

    I appreciate the client focused approach here; no doubt many investors are troubled by the fact that this law was necessary. That said, it seems that the main message most firms will want to send to their clients is that nothing has really changed. Before, they were acting with the client’s best interest at heart. Now, they are still acting with the client’s best interest at heart, except that it is also mandated by law. The compensation structures have received special exemptions, so everybody will still be paid basically the same way.

    The main thing to do ought to be to sit down with clients, assure them that there is no cause for concern, have a conversation about their investing goals and risk tolerances, and when investing, avoid deals that could be seen as conflicts of interest. This gives customers the assurance that whatever disreputable practices led to the passage of this law, their financial service provider had no part in them.

    Really, the best firms should consider this to be an opportunity. In the aftermath of this bill, consumer confidence will become tradeable, and the institurions that have to undergo the least amount of change get to project their honesty to the world. My bet is that the market pays them well for it.