During a webinar held April 20, 2016, think2peform CEO, Doug Lennick and Keith Loveland, a nationally recognized attorney, author, consultant and teacher within the financial planning industry, discussed how to position your practice to your advantage under the new Department of Labor Fiduciary Standard Rule. The live webinar audience included nearly 1,000 participants from the financial services industry, thanks, in part, to Kaplan University School of Professional and Continuing Education.
DoL Rationale For the Ruling
“This final rule and exemptions aim to insure that advice is in consumers’ best interest, thereby rooting out excessive fees and substandard performance otherwise attributable to advisers’ conflicts, producing gains for retirement investors.” – Department of Labor
While this legislation greatly impacts the financial industry, both Lennick and Loveland see the changes in a positive light. “Folks were seeing opportunities for improvements in the industry,” said Loveland. “The old ruling permitted conflicts of interest and the new rule closes the loophole.” One of the main concerns for advisors is in relation to fee structures. Here, Lennick encourages advisors to reframe their value proposition. “Your value is in your advice, not the products you sell,” said Lennick. “Historically, advisors have undercharged for their advice.”
With the commoditization of products and the compression of product-related fees, many advisors have already moved to charging for planning and advice. To assist advisors and firms needing to reframe their approaches, think2perform offers these recommendations.
DoL Survival Kit
- Move to advice-based fees from transactional-based fees.If this is a new model, consider reducing asset-based fees to cover advice fees. Complexity of the advice and the amount of access the client has to the advisor are among some factors that impact an advice-based fee structure.
- Shift to Behavioral Financial AdviceUnder the new rule, clients can initiate contract law. Behavioral Financial Advice can mitigate this risk by helping you know your clients’ values, and focusing on giving advice consistent with their goals and values. Through this empathy and understanding, clients receive greater assurance you are offering advice in their best interest.
- Practice the Smart Money PhilosophyPrepare clients for the certainty of uncertainty. “We have to deal with the uncertainty of the length of life, and we have to deal with the uncertainty of our health status, and we still have to deal with the uncertainties of the market,” said Lennick. “But if you follow the philosophy, whenever you need money, there’s going to be a smart place to get it.”
Lennick and Loveland also agree financial advisors need to demonstrate leadership, not just with their teams, but also with their clients. “Like a personal trainer, advisors provide the strategies and accountability for better performance,” said Lennick. “Leaders result in clients being more prepared for their retirement,” said Loveland.
For information on how to navigate the DoL Fiduciary Rule with greater ease, improve your leadership effectiveness and benefit from the value of the behavioral financial advice model, contact Ryan Goulart at rgoulart@think2perform.com
A recorded version of the webinar is available here.
The presentation is available for download here.
