Despite months of delays and continued speculation about an outright appeal, as of June 9, 2017, the DOL Fiduciary Rule is now officially in effect.
The overall goal of the DOL Fiduciary Rule is to protect individuals, particularly those investing in retirement products, from being sold high-cost products that benefit their advisors’ commission earnings more than their own financial goals.
Legislators are likely to continue reviewing the rule, and enforcement policies remain unclear, yet most experts and observers agree: the fiduciary standards illuminated by the DOL Rule are now something consumers will expect, if not demand, and firms must respond in kind.
But even with early momentum, the changes being mandated by the DOL Rule are pervasive, and will have significant implications for distribution, compliance and advisory teams. This will require firms to take a holistic, data-driven approach to the transition.
Sales enablement technologies can be highly effective in helping to accelerate, motivate, and measure the required changes for advisors, all while supporting a move to greater transparency, and elevating your team’s overall skills for client communication, knowledge sharing and the delivery of credible financial advice.
While most firms have invested time, energy and resources to understand the DOL Rule and its future implications, they must now direct their attention to what it means for their specific business practices, what portion of their workforce will be affected, and how they will direct and train their teams to implement the necessary changes, regardless of any potential regulatory developments.
Two key elements of the rule will affect how wealth managers specifically do business:
- Regulatory authority over financial advice to retirement account holders will be expanded, and
- Compensation models that conflict with the client’s best interest will be prohibited.
In response, firms will need to deliver proof that they are providing credible advice in the best interest of their clients. Planning software and other FinTech tools can make this easier to accomplish, as well as support record keeping and documentation tracking should they be needed in the future.
But the real business wild card? As in most large compliance and change management initiatives, it’s the people – in this case, your advisors and other client-facing staff that are delivering investment advice and interacting with clients every day.
What Must Advisors Do to Adjust to the New Rule?
At the highest levels, advisors and brokers will need to shift from a product-centric approach to a customer-centric approach. This will require a number of changes for firms, particularly when it comes to sales training and enablement:
- Advisors must possess a deep understanding of the full breadth of products available to recommend. Larger institutions will find this even more challenging, given that their product set is typically greater than small or mid-market firms.
- Since advisors are now offering an expanded scope of products, firms must be able to train them quickly on not just the composition and risks of each product, but also how to present them in a way that is compliant with the Fiduciary Rule.
- Advisors must adhere to the new rule without abandoning or neglecting clients with smaller portfolios. Because they will be expected to spend more time with each client, and provide more personalized and consultative service, advisors will be challenged to improve productivity and “do more with less.”
- Advisors must be trained to follow and adopt new compliance processes that will inevitably be implemented to provide sufficient proof that they are, in fact, making recommendations in the best interests of their clients, not their own pockets.
- To avoid potential risks and penalties in violation of the DOL Fiduciary Rule, firms must be able to measure the adoption and effectiveness of their training programs over time, and ensure that advisors’ behavior is consistent with new regulatory requirements.
Qstream: Driving Results in Regulated Industries
Multiple clients in the wealth management sector are using Qstream to ensure their advisors retain the deep product, technical and regulatory knowledge required for success under the Fiduciary Rule. Firms are also relying on Qstream to prepare advisors to manage risk in its many forms – from economic conditions to sustaining customer loyalty and retention.
One multi-national bank uses Qstream across multiple divisions to ensure that its employees possess the optimal level of product and market knowledge, and that they are messaging the value of those products in a consistent way with customers. Launching 2-3 Qstreams a month, the bank has seen a more than 15% improvement in product proficiency, all while sustaining engagement rates of 97% or higher.
Another large bank holding company based in the southeastern U.S. is leveraging Qstream to support anti-money laundering (AML) compliance. Changing regulatory dynamics have added significant operational costs and complexity; therefore, it was imperative that the bank establish and implement adequate AML procedures to help their branch managers and tellers detect, investigate and report suspicious activity. Each month, more than 1,000 branch managers and tellers are enrolled in Qstream to ensure compliance with the firm’s AML rules. With help from Qstream, they have been able to reduce the amount of training per user by five hours per quarter, with an average proficiency score of 93%.
To learn more about how Qstream can help your firm execute, reinforce and coach your employees to new levels of engagement and compliance with the DOL Rule:
- Download our ebook, “An Advisor Enablement Guide to the DOL Fiduciary Rule: Is Your Firm On Track or At Risk?”
- Request a personal demo with a member of our Financial Services team