When the DOL Fiduciary Rule became law several weeks ago, commission-based advisor/client relationships were effectively transformed.

Because the rule and its potential ramifications have been widely reported and discussed in the media — and within organizations – for months preceding the April 6 enactment, advisors weren’t exactly caught off guard. But many advisors may still struggle with new practical considerations.

Going forward, advisors must qualify for a best-interest contract exemption (BICE) in order to receive commissions on annuity sales. To do so, they must ensure they’re providing advice that’s in the client’s best interest, and advisory firms must have practices in place to eliminate potential conflicts of interest.

Erin Sweeney, counsel at Washington, DC-based Miller & Chevalier and former DOL senior benefit law specialist, said one of the most helpful parts of the final ruling is that commission-based products are eligible for the BICE exemption. Initially, the DOL proposal had many advisors worried that a commission-based program would never comply with BICE, and that they would instead be limited to providing fee-based programs.

“There are some helpful pieces in the final regulation, along with an understanding and appreciation by the DOL that complying with the rule is not one-size-fits-all and the rule doesn’t intend to drive everyone to a fee-based model,” Sweeney explained.

Meeting the challenges of the rule is a marathon, not a sprint. However, advisors can start preparing for new requirements and expectations with four initial steps:

1. Assemble a task force. “Organizations should put together a task force of people to study and understand their current advisement landscape,” Sweeney said.

2. Look at the current method for offering advice. Advisors must get their arms around what the client interface looks like – and how advice is given. “The task force works to identify where there’s an interface with clients and look at how advice is given and how advice travels through the business,” Sweeney pointed out. Often, some groups within an organization will provide advice differently than others, and it’s essential to understand how each operates, she added.

3. Divide and conquer. Firms must identify which areas are and are not subject to the BICE. Sweeney added that advisors should identify the parts of their business that provide advice and are therefore subject to the new regulations, and then separate the back-office tasks that are not subject to BICE. “Then, organizations need to look at their business model to figure out how they want to firewall and protect the advisement part of the business from the other areas that are not providing fiduciary advice,” she said.

4. Decide on a new structure. Once they understand how advice is given, organizations must decide how they want to structure their business for this brave new world and take a close look at the individual components of their business model.  For instance, Sweeney said, advisors should sit down and determine what disclosures have to be put into place.