The Department of Labor Dividend
It’s been 6 months since the DOL’s fiduciary rules on QUALIFIED retirement assets were published, and while they have caused a lot of consternation and uncertainty in the advisory community, the good news is that we now have greater clarity surrounding the interpretation and implementation of them. With close to $14.2 trillion of qualified monies being disrupted and $334 billion of qualified savings expected to be orphaned, advisors that educate themselves on the new rules and effectively position their business for the new regulations, will have an opportunity to increase revenue growth and deepen client engagements.
The LifePro Navigator
While change is never a comfortable process, LifePro wants to make it easy for our advisors and agents to navigate the changing landscape and make the necessary adjustments required by the Department of Labor. LifePro is currently creating and piloting a turnkey solution that will minimize the impact of the new rules on the advisors’ day-to-day life and help them not only survive, but thrive in the new best interest, client-centric regulatory environment.
For advisors that prepare, the extension of ERISA rules to all qualified monies, will likely be a positive catalyst for their business. The deeper we dive into the new Department of Labor fiduciary rules, the more confident we are that the new fiduciary standards will offer asylum to those that are already acting in their client’s best interest and provide them with new opportunities. It now becomes imperative to help advisors offset some of the industry-wide headwinds such as shrinking commissions, increased competition from investment advisors, and increased regulatory burdens. Choosing the right partner to help you navigate the new regulatory landscape will be a key factor in maximizing the benefits of the new rules to your firm while containing the costs associated with proper implementation.
A Fork in the Road – Choose Wisely!
We expect a bifurcation to emerge between those advisors that embrace the new rules and those who resist the new industry framework. Based on our due diligence and countless hours with industry lawyers, we expect that advisors who take the necessary, but easy steps to protect themselves will emerge from the DOL process, stronger and more profitable. The advisory businesses that proactively accept and prepare for the new rules are likely to reap the benefits of a new regulatory dividend, fueled by:
1.) Higher revenue growth
2.) Recurring revenues
3.) Greater business visibility
4.) Increased market share
5.) Diversity of revenues
6.) Higher business valuations
7.) Deeper client engagements
For those businesses active in qualified markets that fail to prepare, we expect growth to slow sharply during the implementation phase of the new fiduciary standards, followed by years of gradual erosion in their existing qualified business. Given the stakes going forward, LifePro has been working diligently to prepare ourselves and our esteemed advisory partners ahead of the implementation of the new fiduciary standards, which will be implemented in two phases beginning April 17th of next year. Fortunately, the preparation process to fortify your existing business will be relatively pain free.
What We Know
While the new Department of Labor fiduciary standards exceeds 1,000 pages in duration and may or not be worse than water boarding to read, the most important takeaways from the new rules can be summed up in the points below;
· Suitability is out; fiduciary & holistic advice is in
· Advisors and insurance agents will likely be considered fiduciaries
· Commission-based products will require regulatory exemptions
· Fee-based compensation will be favored
· Financial planning takes center stage
Fortunately, NONE of these changes will force the advisor to change what they sell or how they are paid if they take the necessary steps to protect themselves and position their business for the new rules. LifePro is advocating a ‘fortify and expand’ approach when it comes to positioning your business for the post-DOL landscape. For those advisors that simply want to continue providing the same suite of reliable commission-based retirement solutions that they do today, that will be possible by teaming up with a financial institution that will provide:
· Access to regulatory exemptions to sell commission-based products
· Educational tools to achieve additional regulatory licensing when required
LifePro is working on an easy-to-use regulatory solution that will allow our advisors to gain access to their favorite commission-based products while illustrating how such products are in the bests interests of the client and providing the educational tools required to pass the Series 65 exam. For those advisors that decide protection is not enough and would like to expand their business to offer the additional services that a Series 65 license affords them, we will work with them to seamlessly transition their business to an advisory, fee-based practice that offers holistic retirement solutions.
Famed investor Warren Buffet often says that “only when the tide goes out do you discover who's been swimming naked”. As the new Department of Labor rules come into effect, we expect to see a clear divide amongst those advisors that embrace and prepare for the new rules of the game and those that operate in denial hoping for a legislative Hail Mary. The truth is that NOW is the time to start thinking about how to position your business going forward, whether you want to fortify your existing business or utilize an expanded toolkit to offer clients a full suite of retirement solutions. Whichever path you choose, LifePro is prepared to ensure your practice successfully transitions and thrives in the Fiduciary landscape.