Time to act and prepare for the DoL’s new fiduciary rule

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The financial industry spent gobs of money on a scare campaign aimed at getting clients to protest the adoption of the Department of Labor’s proposed new fiduciary rule for advisers.

That campaign failed to stop the rule, but it did work pretty well in terms of scaring clients and making some of them wonder whether their advisers really put their interests first.

Now with the rule heading for implementation, some experts warn that advisers need to not just start gearing up their offices to comply with the rule’s transparency, record-keeping and fee structure requirements, but also to take the lead in explaining the rule to their clients and saying how it will affect their relationship.

John Anderson, managing director and head of practice management at SEI Advisor Network in Oaks, Pa., doesn’t mince words.

“I talk to advisors all the time, and some 80% of them say they want to wait and see how the lawsuits against the rule turn out and whether the next president kills the law. That is a terrible idea, though, because clients are starting to come in asking how their adviser is getting paid,” Anderson says.

“Most are very upright and put their clients’ interests first, so they should be embracing this rule and standing on their desktops shouting, ‘Hey! We’ve been doing this all along!’” he says.

Anderson isn’t alone in suggesting that rather than calling the DoL rule a threat to their businesses, advisers should see the fiduciary requirement as a marketing opportunity.

Matt Oechsli, principal at the Oechsli Institute in Greensboro, N.C., which trains advisors, says that the fiduciary rule can actually be a “rainmaking tool” for elite advisers who know how to use it.

“As much as this DOL fiduciary ruling is a pain in the a**, embrace it, and it creates a perfect prospecting environment,” he says.

Oechsli says his firm’s research shows hidden fees to be a “major trust buster” and that whenever such hidden fees are discovered, whether intentional or not, clients feel as though they are “being screwed.”

His answer? When advisers are in social situations, they can ask potential questions such as: Has your adviser met with you about the upcoming DoL regulations regarding fiduciary? Has your adviser gone over all the fees that are most likely imbedded in your portfolio? Has your adviser mentioned anything about a [best interest contract exemption] form?” and Have you had your financial plan reviewed by an independent CFP?”

Advisers must ask questions that suggest that they stand ready to apply the fiduciary rule, and that can help win new clients, Oechsli says.

This story is part of a 30-30 series on ways to upgrade your practice.

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