What President Trump’s DOL Action Means for the Advisor

What President Trump’s DOL Action Means for the Advisor

There’s been a lot of confusion in the past few days about the fate of the Department of Labor’s (DOL) Fiduciary Rule. It was widely reported on Friday that President Trump would be signing an order to delay the rule for six months pending further investigation. However when the order was finally issued on Friday afternoon things changed once again, so let’s get to the bottom of things. Only one order was signed (not two as originally expected) which had no specific reference to the Fiduciary Rule. Instead, President Trump has directed the Secretary of the Treasury to conduct a 120-day review of all laws and regulations related to the financial industry. The President also signed a memorandum on the Fiduciary Rule which although doesn’t specifically call for any delay in the ruling does call for a substantial review. According to Section 1 of the memorandum, “You [DOL] are directed …

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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 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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Technology Takeover: What You Need to Know About Robo Advisors

Technology Takeover: What You Need to Know About Robo Advisors

Technology is catching up to the financial industry at a rapid rate. According to a report by KPMG and CBInsights, fintech raised more than $19 billion in the last year. Originally, financial technology, or fintech as it’s now called, was the term used to describe technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin. Some members of the financial industry are worried about the effect fintech will have on the financial world, specifically the effect of robo advisors. A robo advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. “Advisors are treating it as a potential threat …

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3 Ways To Prepare For The Impending DOL Fiduciary Rule

The Department of Labor’s Fiduciary Rule is here to stay. Released publicly on April 6th, the conversation is now transitioning from debate to preparation. Many advisors are adopting a “wait and see” approach to the rule, with plans to adapt their business once the rule takes effect next year. Many experts are warning against this position. Businesses need to start planning now. Though the rule has been heavily discussed in the financial industry for the last year, the majority of the general public has no idea what’s coming or how it will affect them. And when the news does hit the mainstream media, there will be a lot of fear and confusion. What does this mean for me? How will this impact my investments? Who do I trust now? First, be sure you understand the implications the ruling will have on your clients. The law will have the largest impact …

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