SAN DIEGO – To prepare for the Labor Department’s fiduciary rule compliance deadline on Jan. 1, Commonwealth Financial Network has focused portion of its an $64 million annual technology budget to modernize and train its base of 1,710 advisors, according to CEO Wayne Bloom.

That was before the DoL announced plans to push out the deadline another 18 months. Now, Bloom said the firm will delay full implementation to the newly proposed deadline of July 1, 2019, even though roughly 80% of the independent broker-dealer's affiliates are already compliant with the rule.

One tool where Bloom said he has seen active engagement since the rollout is its advisor facing feedback module. Commonwealth’s team of dedicated specialists have received nearly 5,000 pieces of feedback from its advisors and their colleagues this year on how to comply with the rule, as well as other ways to improve their businesses, he said.

“For us, thankfully, they’re rethinking this and the delay isn’t official yet until ‘19, but we’re pretty comfortable with it,” said Commonwealth CEO Wayne Bloom.
“For us, thankfully, they’re rethinking this and the delay isn’t official yet until ‘19, but we’re pretty comfortable with it,” said Commonwealth CEO Wayne Bloom.

“From day one of the DoL rule we have been concerned about the impact on the small investor,” Bloom said at Commonwealth’s 2017 National Conference in San Diego. “I am confident that whatever position the fiduciary rule lands, we win.”

Bloom and members of Commonwealth’s executive team; Andrew Daniels, managing principal of business development; Richard Hunter, president and chief operating officer; and John Rooney, managing principal of the firm's San Diego office, sat down with Financial Planning to discuss some of the challenges they expect in the year ahead.

An edited transcript of the conversation follows.

What’s been the biggest challenge right for Commonwealth Financial Network in regards to compliance with the fiduciary rule?
Bloom: It really was a hit to our innovation, and [how] we like to spend our time and money. This year that money will be to the tune of about $64 million in technology, to make things better for our advisors and our investors. This was to comply with the spirit of something that was wonderful, but the execution was just a little onerous, which is very frustrating.

What types of new technology are in the pipeline?
Bloom: Our suite is really developed as three silos — Practice 360, Client 360 and Investor 360. If an advisor is working on a particular household or a client, it’s in the Client 360. The investors go in through Investor 360, and we’ve got a beautiful site for them. New things that are coming down the pike for that include a lot more planning tools; more goals-oriented things. Then when they’re in the Practice 360, that’s when the advisor can look at it and run reports and analyses on their whole book of business. So it’s really three different views that are really pretty interactive with each other.

How is Commonwealth coping with the back-and-forth from Washington on the rollout of this rule?
Bloom: For us, thankfully, they’re rethinking this and the delay isn’t official yet until ‘19, but we’re pretty comfortable with it. The impartial standards that are in place are exactly how Joe [Deitch] founded Commonwealth in 1979, and how we operated as long as I’ve been there for the better part of 29 years.

So, I’m very comfortable with operating under those standards. They seem reasonable and fair and hopefully when they make it official that sticks for that 20 months, then the SEC and the DoL can get together and come out with their own guidelines and a fiduciary policy that looks more like the SEC that’s surrounded around transparency and disclosure of conflicts versus the elimination of conflicts, which are virtually impossible.

"One thing that keeps me awake at night now more than anything else is that now that DoL seems to be on hold," said John Rooney, managing principal of Commonwealth Financial Network's San Diego office.
"One thing that keeps me awake at night now more than anything else is that now that DoL seems to be on hold," said John Rooney, managing principal of Commonwealth Financial Network's San Diego office.

What do you want to see from the SEC?
Rooney: We’re hoping for the harmonization of rules that spans any investment channel. Whether it’s an RIA or a broker, we want to all be playing by the same rules and have some clarity, not only for us but for the investing public.

One thing that keeps me awake at night now more than anything else is that now that DoL seems to be on hold. You’ve got these attorneys general from different states trying to rush into the breach to wear the mantel of investor protection and they’re all headlong, running down this road to provide guidelines for their own state. I just can’t imagine ending up with 50 different state regulations that we have to deal with.

Daniels: What’s been particularly frustrating for us is there’s an element of being the baby thrown out with the bathwater; in that Commonwealth has a 38-year history of investor-centric work by the advisors here and the alignment of interests, starting with the planning approach that they have. There’s a higher percentage of CFPs here than virtually any other firm out there in the industry, and that planning approach breeds a client focus that is already doing the right thing. Whether it’s at the state level or whether it’s the DoL … it has been particularly burdensome.

What has been the method of educating advisors on fiduciary rule compliance?
Bloom: We approached it from two primary sources. One of them is our feedback tool. We had a special segment of it directed purely to DoL where [advisors] could ask whatever they wanted, lots of different categories, and it went to a team of 30 or 40 people. During that sort of hot-and-heavy time period, there were as much as 200 questions a day coming in. We also have a whole section of the website that is dedicated to DoL education.

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Hunter: At every one of our incentive conferences — and we probably had six or seven of them from the beginning of the year ‘till around June — we had a panel of three people that are heavily into the details, including Wayne, our chief financial officer and somebody from legal, and they sat up on a panel until the audience was done asking any question that they could possibly come up with on the DoL. I think that was really helpful to get in front of, let’s say, 700 or 800 or our best advisors and try to allay their concerns and fears.

Andrew Shilling

Andrew Shilling

Andrew Shilling is an associate editor for Financial Planning, Bank Investment Consultant, On Wall Street and Money Management Executive. Follow him on Twitter at @AndrewWShilling.