What happens when the Department of Labor fiduciary rule dust settles? In this article, financial software technology firm Grendel discusses how advisors might prepare for a new regulatory environment.
There has been much ado about the impending Department of Labor (DOL) fiduciary rule. It’s the hot topic at conferences and has been widely discussed in industry publications. Despite all this, there remains a large degree of uncertainty about exactly how the final rule will affect financial professionals.
After the presidential election, the future of the rule seems to be even muddier. Nevertheless, the industry has been bracing for a change that will shift how many operate.
People in our industry appear to be of the same mindset: First, they believe the DOL rule will be implemented in some form. Second, they believe that even if the DOL rule is killed, the enhancements to transparency and fiduciary responsibility are becoming the new normal. Firms are changing procedures, training staff, and updating technology – all to fall in line with the proposed rule. In the very near future, those without these improvements will be at a competitive disadvantage with clients and compliance officers.
We don’t need to get into the specific procedures DOL is proposing, but it is important to note that the underlying message of the DOL rule is that clients need more transparency and advisors need to adhere to a higher fiduciary standard. DOL is changing what will be expected for all financial professionals when it comes time for an audit or lawsuit – and that’s the kicker. Advisors will have to maintain records that show they acted at all times in a fiduciary capacity.
So what is an advisor to do? We at Grendel recommend a simple process:
1. Have a procedure for doing the right thing (product review, client review, act in client’s interests, etc.)
2. Do the right thing
3. Prove the above
These steps seem laughably oversimplified. But in a way, it is that easy. Experts and industry publications point to industry CRMs as a must for proper tracking of your actions. A good CRM will allow you to create procedures, follow procedures, and prove that you did so. And it’s that last point – proving your case – that is most important.
Discuss DOL with your CRM provider. Ask what actions you can take to protect yourself. Ask how the CRM can protect you. Be sure you understand how the CRM can prove what you’ve done. Ask what can be done during an audit. Your technology is critical – more so now than ever. Be sure the platform you’re using has your back.
Grendel’s CRM and performance reporting technology platform has evolved as the industry has changed. For a demonstration and to join a discussion of trends in the industry, click here* to register for the webinar “Grendel’s Evolution from CRM to WRM” on Wednesday, Feb. 22 at 4 p.m. ET.
You can explore the Scottrade® Advisor Services Strategic Resource Center to connect with Grendel and other organizations that specialize in technology, compliance, research, education and marketing. Many of these resources offer discounts to advisors who custody assets with Scottrade. (Scottrade provides this resource for informational purposes and does not specifically endorse any of the businesses within the directory. Scottrade also does not pass judgement as to whether those services are appropriate for specific business needs. Be advised this is not a full and comprehensive list of businesses that offer these types of products or services and that advisors are responsible for doing adequate research before making any purchases.)