As many of you know, the U.S. Department of Labor (DOL) released its final fiduciary rule in 2016, requiring financial professionals handling retirement plans to act in the best interests of their clients. While there’s a lot of uncertainty and speculation of a delay, at this point, we need to continue marching forward to the April 2017 compliance date.
Based on the conversations I’ve had with plan sponsors and advisors over the past few months, it’s safe to say that the DOL changes have left many of you feeling like dancers with two left feet. As an avid dancer, I’ve realized that learning a new dance is about changing—altering familiar movements in ways that may be challenging or uncomfortable. It requires strength, balance, flexibility, and risk acceptance on the part of the dancer.
With the new fiduciary rule, we have been given an amazing opportunity to take a new approach—to change the music—and help create a more transparent financial planning environment, remove conflicts of interest, and improve the retirement security of Americans. The rule speaks to Vanguard’s core purpose—to take a stand for all investors, to treat them fairly, and to give them the best chance for investment success—and we believe it’s a change worthy of our support.
A step in the right direction
As advisors who provide investment advice to retirement plans, plan fiduciaries, or individual retirement investors, many of you are already headed in the right direction. Mission statements and marketing materials I’ve seen from many of your companies proudly proclaim, “We put our customers first.” You should continue to pursue a “clients-first” approach and view this DOL change as an opportunity that brings the promise of increased transparency and innovation to all investors. The new rule is intended to foster greater trust among investors and boost retirement savings—a win for investors and those who advise them.
Additionally, the DOL rule may offer business opportunities for financial professionals willing to accept fiduciary status to serve plans with less than $50 million. Providers serving small-market plans who wish to avoid fiduciary status may benefit from working with a financial professional who can serve as plan fiduciary. For plans with assets of more than $50 million, the fiduciary regulation has little direct impact. Frank Nessel, a senior ERISA consultant in Vanguard Strategic Retirement Consulting, provides additional insight in his blog, A sigh of relief from plan sponsors over the new fiduciary standard.
More company on the dance floor
Just as dancers perform on stage (or in my case, the living room) to showcase their unique talents, advisors will need to demonstrate how they provide value. Financial professionals should showcase their value propositions and emphasize what sets them apart from the competition.
You may already be demonstrating your value to clients, but thanks to the DOL, you’ll soon have more company on the dance floor. Our landscape is becoming increasingly commoditized, and as more and more advisors attempt to demonstrate their value, it’s essential for you to remain differentiated.
The growing demand for transparency, lower fees, and lower-cost products will provide considerable opportunities for advisors who are quick to develop compliant, forward-thinking solutions for clients. You’ll be positioned to succeed by continuing to proactively address the needs presented by the shifts in financial services.
Vanguard can work with you to refine your value propositions and discuss how our low-cost funds and recordkeeping services can help you provide quality products to your plan-sponsor clients and participants. Additionally, we can help ensure you have the tools you need to help plan sponsors minimize risk, achieve positive plan results, and apply best practices for investment committee decision-making. Our Plan Advisor Resource Center also provides tools and resources to help navigate the new regulatory landscape. You can read about The impact of the DOL’s fiduciary rule on financial professionals, which features frequently asked questions about the final rule.
Be the dance partner clients choose
Trust and communication are essential to any successful partnership, on or off the dance floor. Advisors must have the knowledge, confidence, and experience to lead their clients through the ever-changing fiduciary landscape while maintaining strong client focus. Clients need to know that you will lead them in the right direction at all times and that your vision is right for their business.
The truth is, you and I have always been guided by a best interest standard in our profession and in dealing with our clients. While the new rule will push the industry to change its tune and learn a new dance that puts the best interests of clients first, I like to think that’s something most of us do every day.
- All investing is subject to risk, including the possible loss of the money you invest.