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Working through regulatory upheaval

Matt Pais

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6 ways to manage changes with clients and staff in the face of increasing regulations.
Once upon a time, a prospect might come through one of Daniel K. Charley’s financial planning workshops, say they were interested in an annuity they heard about, and the seven-year MDRT member from Marlton, New Jersey, would write the application and leave it at that.

Not anymore
“Now, if they say they really like an investment, I say, ‘Great; we need to sit down and do a complete financial plan on you,’” Charley said. “We put it all in the system, document everything and set up to three appointments — discovery, evaluation and execution — and make sure we are acting in the client’s best interest to address their debts and what they want to accomplish in retirement.”

The seeds of this change began in December 2016 as Charley considered the implications of the U.S. Department of Labor’s (DOL) fiduciary rule, which partially went into effect in June 2017 and recently had its full application delayed until July 2019. Charley, who works with retirees and pre-retirees, began instituting his process changes in March of this year, and his proactive preparation has led to better relationships with more clients, involving more assets.

How has he made this transition to a stronger practice even as the process with each client and document becomes longer? This is how:

1. Educating clients through marketing campaigns. these materials identify seven different touchpoints to get clients up to speed on the regulations. Charley uses a service that provides white papers on what the Department of Labor is, what the changes involve and a timeline for the implementation of the rule. The other touchpoints address how this impacts the client-advisor relationship, moving toward a fee-based practice, and the difference between suitable recommendations and advisors advocating in the client’s best interest.

2. Face-to-face conversations during annual reviews. Clients, of course, can also ask questions during quarterly calls with Charley. Yet the face-to-face annual meetings are when the materials they’ve received will have prepared them to address the issues surrounding regulatory change from a transactional relationship to a fiduciary one. “What we learn is people have more money than they tell you initially. It requires a level of trust,” he said. “When we’ve gone through this process, there are a lot more assets that we weren’t aware of. We are also uncovering different questions to provoke thoughts in clients, talking less about money and more about families and longevity — what they’re trying to accomplish in their lives and using money to get them to those goals.”

3. Using technology to compare products and identify opportunities for clients to make changes. This helps Charley understand what type of investor the client is (active or passive) and where they would be best served with the lowest fees. “We’re beginning to have those conversations because it’s all brand new to them as well as us,” Charley said, noting that in the past, client strategies were far less individualized. “Now we show them multiple options, explain the positives and negatives for all of them and come to a decision in their best interest.”

4. Staff training. All seven staff members (two advisors and five administrative staff ) have participated in in-house and online training to understand the financial planning process and the involved software. They also have completed a session about the DOL fiduciary rule and trained on internal compliance related to documentation and what information is required.

5. Expert input. Charley hired attorneys to advise him on the regulation, providing additional guidance about his process and the necessary client conversations and documentation for compliance.

6. Establishing a process. If a client says they just want something quick and easy, not an extended interaction with three meetings, Charley will either say it is not a good fit for him or have the client sign a document saying the transaction was based only on limited information. “I’ll give you what you’re asking for, but if you’re not providing all the information, then you can’t hold me liable for any misrepresentations if it does not line up with your financial plan,” he said. This happens with 10 percent of clients but is decreasing as people are educated about the DOL fiduciary rule, he added.

Daniel Charley


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