DOL Digest July 11, 2016

SSN Marketing Corporate Office, DOL

If you’re wondering whether you’ll need to restructure your value, pricing and service as a result of the Department of Labor’s fiduciary rule, consider these three near-certainties under the new regulation:

  • If you deal with qualified accounts or IRAs, including IRA rollovers, you will likely be considered a fiduciary under the new DOL rule and will be subject to its requirements.
  • You will face greater price competition and fee compression.
  • You will have to compete on your value for the services you offer.

Consequently, it will soon be even more important to differentiate your practice by offering holistic advice and value-added services. That means you may need to rework your value proposition, pricing and service statements to reflect your updated business model.

Although the first round of changes from the DOL fiduciary rule won’t take effect until April 2017 and full implementation won’t occur until January 2018, you should begin updating this important information. Start with these five steps:

  1. Conduct a whole book analysis — Analyze your qualified (i.e., accounts where you must follow the DOL fiduciary rule) and nonqualified accounts. Then separate your qualified accounts by discretionary (i.e., those that you or an affiliate has discretion over) and nondiscretionary. Next, separate nondiscretionary accounts by commission-based and fee-based. This exercise will help you assess the different segments of your business, and once we give guidance on each segment, you will have a great foundation to work from.

Then determine how much revenue you derive from IRA rollover business and start thinking about what criteria will constitute recommending a fee-based arrangement versus a commission-based arrangement when recommending a rollover.

  1. Update your service matrix and pricing — Review all materials that describe your fees and services and ensure they tangibly describe how you convey your value. If you don’t offer a full-service relationship with reasonable, fee-based compensation and high-value services, you might consider it to reduce risk to your practice.

You should also evaluate your pricing to determine if it is transparent and reasonable for the services you offer and if having a commissionable or advisory account would be in the best interest of your clients. A good place to start in determining the best account type is answering three questions:

  1. Why this client?
  2. Why this product or strategy?
  3. Why now?

Watch for further detail on what to consider and document before moving a client from a commission account to a fee-based account in the next issue of our DOL Fiduciary Digest.

  1. Refine or upgrade your value proposition — Consider the following questions to help you articulate your value proposition.
  • Do you have a specific process you follow to help clients achieve their goals?
  • Do you use an investment policy statement or risk profile analysis?
  • What other technology do you use to help address client goals?
  • Do you use agendas for each meeting?
  • Do you have written criteria for portfolio selections and evaluation of money managers?
  • Do you document your process so clients understand the method you use to help them achieve their goals.

Another valuable tool that can help clearly articulate your value to your clients is “50 Things: What a Professional Advisor Does for You.” This informative document (available for $97 at can be personalized with your practice’s information and logo and can be printed and mailed to clients and prospects, posted on your website, included in a welcome kit or broken up for use as individual social media posts.

An annual membership to costs $247. However, the site offers a free 60-day trial period that allows you to purchase the document and many other resources without becoming a member.

  1. Create your fiduciary positioning statement — When articulating your role as a fiduciary, your messages should make it clear to your clients that:
  • You don’t recommend products based on your compensation.
  • You provide advice and recommendations that are in their best interests and appropriate for their personal situations.
  • You will always be transparent in the commission or fee-based compensation you receive for managing or selecting investments for their account.
  1. Update your client-facing materials — Materials that will be presented to clients and prospects should be updated to reflect your fiduciary status before April 2017. These include your:
  • value statement
  • branded planning process
  • service matrix

Preparing for the full implementation of the DOL’s fiduciary rule doesn’t have to be a daunting challenge. We will provide tools, coaching, education, notifications for your existing clients, contracts, disclosures, client-approved letters and practice analysis reports to guide you through every step of the process.

The Steps to Take Guideline

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