At a recent TRAU Practice Management Institute (TPMI) program with 25 advisors right after the DOL’s final conflict-of-interest rule was released, the last session was dedicated to sharing what advisors will do to change their practices to comply with the rule.
There was dead silence, either because advisors didn’t know or because they were waiting for their BD or RIA to tell them. In fact, the head of retirement for a major wire house explained to me that they are carefully formulating their strategy and they expect advisors to not only follow the directive but to repeat it precisely to their clients.
That doesn’t stop industry experts or the press from suggesting what to do. In fact, Tim Hauser, Assistant Secretary for Program Operations at the EBSA, at a recent ICI meeting made some general points, and suggested that the industry will come up with innovative solutions to comply.
One interesting issue raised: How will the rule affect recruitment and bonuses which, if an advisor makes a move, might require clients to switch products. Is the move in the best interest of clients or the advisor?
Another expert reviewed the most common misconceptions about the DOL rule, which include:
- Nothing has to be done until next year
- Fee-only is a blanket protection
- A BICE can cover all issues
- The DOL will tell me what I need to know
- I can conduct business as usual
Some experts believe that robo advisors will solve some vexing conflict of interest issues, but blogger Michael Kitces offered that robos owned by product manufacturers like Schwab and BlackRock may have inherent conflicts.
Another change: Although practically all advisors working on a DC plan will have to act as a fiduciary or partner with one, plan sponsors will undoubtedly be paying more attention to the advisor they hire. This could mean more formal advisor RFPs for plans with more than $10 million and some form of benchmarking or RFI for smaller plans.
One thing is for sure: It won’t be business as usual, especially for DCIOs that have traditionally provided lots of support and entertainment for plan advisors.
