Regulation and Compliance > Federal Regulation > DOL

Top 3 Ways BDs Can Help FAs With DOL-Related Platform Shifts

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Throughout this year, many financial advisors are paying closer attention to the investments they typically recommend to clients and have been forced to reassess which ones best align with the new regulatory environment.

Complicating matters is the Department of Labor’s latest proposal to delay implementation of its fiduciary rule by another 18 months. Advisors, however, should not have to navigate this period of uncertainty alone.

Indeed, broker-dealers have an important role to play in helping them get through this process stronger than ever — both in meeting the demands and needs of their clients, as well as handling their many compliance obligations.

Here are three ways broker-dealers can best help advisors select products and asset managers in a post-DOL era:

1. Provide technology-driven tools that take the guesswork out of product selection.

Given how national news outlets have covered the DOL rule, many investors are now fully aware of what it means to be a fiduciary — and will likely expect that type of relationship with their advisor, regardless of what happens to the rule in the future.

Fortunately, some firms added tech tools to their platforms that not only help advisors better meet these client expectations but prevent the appearance of favoring one product over another.

One such example is a digital questionnaire that accompanies the account opening process that prompts advisors to ask clients a range of questions touching on everything from risk tolerance to financial goals.

A client’s responses generate appropriate product suggestions, including some investment solutions that tend to catch the eye of regulators when offered in a vacuum, like variable annuities, REITs or other alternative vehicles. In a fiduciary era, having access to such tools is rapidly becoming a “must have” not a “nice to have.”

2. Offer a fiduciary-centric process for selecting third-party asset managers.

Firms have always had due diligence procedures in place for selecting third-party asset managers (or TPAMs). However, these processes have become infinitely more important in the wake of the DOL rule and the landscape that has emerged as a result of it.

Obviously, selecting TPAMs is a complicated process with many nuances, and everyone will take a slightly different approach.

But, at a minimum, firms need to put a process in place to review and document the practices of their current or potential partners to find out whether they are taking a fiduciary-centric approach to fees, selecting investments and protecting investor assets.

3. Deliver user-friendly planning tools that allow advisors to document and provide context for product recommendations.

Now more than ever, documentation practices have been put under the microscope.

It’s critical, therefore, for firms to have the digital tools that will enable advisors to both more easily document client conversations and feel more confident about their recommendations — not just concerning individual products but also the way in which such products align within a client’s financial plan and agreed-upon investment management process.

We are months, perhaps years, away from knowing how the DOL will implement and enforce its fiduciary standard. The recently proposed 18-month implementation delay clouds the picture even further.

Until we gain greater clarity, the landscape will remain difficult to navigate in a number of areas.

Product selection, choosing the right TPAM partners and documentation are undoubtedly near the top of that list, and broker-dealers owe it to their advisors to invest in the tools and come up with the processes that will provide guidance in these areas.