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Regulation and Compliance > Federal Regulation > DOL

Advisors may revamp their practices in wake of DOL rule

By The LifeHealthPro Editors

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The new Department of Labor (DOL) fiduciary rule has most advisors considering changes to their business model as they wait to learn their firm’s new compliance procedures, according to a new survey.

Nationwide disclosed this finding in its “Countdown to Implementation” study of 622 financial advisors representing a mix of distribution channels, tenure and production. Administered by a third-party research firm in May, the advisor survey will provide a quarterly snapshot of the progress the industry is making to implement the new rule.

Related: NAFA plots course in DOL rule fight

“This is about where we thought it would be,” said Kevin McGarry, director of the Nationwide Retirement Institute. “Firms are taking this seriously, but still have a lot to work through. As we move through the next 18 months, we anticipate shifts in product mix and levels of understanding and concern.”

While advisors provided varied perspectives regarding how they plan to change their mix of products sold, 43 percent may plan to expand services offered to more holistic planning and 26 percent may plan to focus on non-qualified accounts.

“The survey insights show that advisors are considering a shift from a transaction-based business model to more of a service-oriented model,” McGarry said. 

Advisors eagerly awaiting firm’s plans

Just 42 percent of advisors say they are aware of their firm’s timeline for implementation or what training or support the firm will provide, while only a third (33 percent) are aware of their firm’s new compliance procedures.

The Best Interest Contract Exemption (BICE) continues to be an area of great concern for firms and advisors.  Only 23 percent of advisors are aware of their firms’ plans with respect to adoption of the BICE to sell variable compensation products.  At the same time, 78 percent identified the BICE as one of the greatest areas of impact to their business.

“This data affirms what we’re seeing across the country,” McGarry said. “Firms are busy working through the new rule, figuring out what it means for their specific situation, and developing their game plan to implement by next spring.”

Related: 3 exciting unintended consequences of the DOL rule

Advisor challenges

As the industry works through this new regulatory environment, advisors are eager for information about the new rule. The advisors Nationwide surveyed consider themselves at least somewhat knowledgeable about:

  • Fiduciary requirements (82 percent)

  • Products subject to fiduciary standards (76 percent)

  • Fee/compensation disclosure requirements (76 percent)

  • BICE (73 percent)

  • What is considered advice vs. education (69 percent)

  • Grandfathering provisions/conditions (64 percent)

  • Levelized compensation requirements (64 percent)

Resources for advisors

The Nationwide Retirement Institute’s new DOL website provides resources for firms and advisors wrestling with the complexities of the new fiduciary rule. On the site, advisors will find information, tools and resources to help them adapt to the changes including thinking through whether they may be a fiduciary, understanding how the new regulations may affect their business, and how to address common client questions.

In addition to the website, Nationwide is holding webcasts and local market events to provide resources and tools on practice management, best-in-class fiduciary practices and how advisors can build and grow their business.

“Nationwide’s goal is to support advisors working to comply with the new regulation by simplifying these complex issues, so they can focus their attention on building client relationships,” McGarry said. “These resources will fill the gaps for firms experiencing budget or size constraints that restrict this level of coaching or guidance for their advisors.”

Related:

DOL 101: The fiduciary rule’s impact on insurance-only agents 

DOL 101: The fiduciary rule’s impact on IMOs

DOL fiduciary rule: Disruption or opportunity?

U.S. Chamber: DOL overstepped its authority with fiduciary rule

What’s behind the surge in fixed indexed annuity sales?

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