Demystifying the DOL Part 4: Capabilities Required to Meet Operational Requirements

Demystifying the DOL Part 4: Capabilities Required to Meet Operational Requirements

The advisor practice should be prepared to add new procedures and technology platforms to support the DOL operating environment. The requirements of an advisory practice to support DOL comprehensively will involve the capabilities and technologies described in the sections below. Contact Management/CRM Many agencies and advisory firms employ a form of Client Relationship Management (CRM) platform in conjunction with the practice. For many firms, however, the DOL will likely dictate a more comprehensive use of such a platform than many firms currently employ in operations. In the field, the CRM will be required to document prospect and client communications, since most communications can be construed as “recommendations” under the DOL and the advisor must avoid any recommendation that contains “misleading statements.” As such, the advisor and staff will likely have to thoroughly document these communications as a requirement of the Financial Institution and make the content discoverable and accessible in …

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Demystifying the DOL Part 3: Operational Requirements

Demystifying the DOL Part 3: Operational Requirements

To comply with the requirements of the DOL, the advisory practice must be prepared to do the following by January 1, 2018. Conduct the Practice as a Fiduciary At the highest level, the DOL Fiduciary Rule states that the advisor must act as a fiduciary to the client. To do so, the advisor must be “prudent” and “loyal.” Prudence requires that the advisor operates with a high standard in terms of monitoring, managing, and advising the client of the status of the investment property. Loyalty requires that the advisor make decisions that are beneficial to the client first and foremost and that would not be considered in the primary interest of the advisor at the expense of the client. Partner with a “Financial Institution” to Execute the Best Interest Contract The DOL Fiduciary Rule creates significant financial liability for the distribution partner. Under the DOL Rule, the advisor must work …

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Why Cybersecurity Rules Are More Than Just Busywork

Why Cybersecurity Rules Are More Than Just Busywork

Cybersecurity rules can sometimes seem like overkill, but it’s important to follow them to the letter to keep customers’ data safe. “The result of data breaches can be costly, especially for small and midsize companies that cannot weather the costs and damage to their reputation,” says Steven Shapiro, a lawyer who has worked as chief privacy officer at a bank holding company and is now in private practice. “The cost can be in dollars lost in compliance to pay for the release of ransomware, loss of customers, dismissal of critical employees and in repairing one’s IT infrastructure.” Here are four reasons why following IT rules is so important, every time. 1. It’s the Law As technology advanced and it became easier to store — and disrupt — large electronic files, the U.S. government enacted legislation to regulate the storage and sharing of information. For those in the financial industry, provisions …

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Demystifying the DOL Part 2: Key Decisions for the Advisor

DOL Fiduciary Rule Key Decisions for the Advisor

Continue to Sell Products for Qualified Assets? At the highest level, financial advisors must decide whether the cost and effort of enhancing operations to accommodate all of the expectations of the DOL are such that it makes sense to remain in the business. Advisors who sell predominantly life insurance, LTC, or DI products with the occasional annuity sale may consider exiting the qualified fund business altogether. Although the legal liability is borne by the Financial Institution entering into the Best Interest Contract, the implications to the financial advisor may be considerable if the business practice must be altered substantially to continue to sell products for qualified funds. Continue to Sell Qualified Assets for Variable Compensation? The second consideration for an advisor is whether to accept variable compensation (i.e. commissions, marketing allowances, etc.) for the sale of annuities and mutual funds for qualified accounts. If the advisor alters his or her …

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