True Link blog

The Impacts of the DOL Fiduciary Rule & How Advisors Can Adapt

Published by:
George Guererro
|
January 12, 2017

On April 6, 2016, The US Department of Labor released its much debated “Conflict of Interest Rule”, broadening the definition of “investment advice fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA) thus transforming the landscape for retirement investment advice for years to come.

On its face, the concept behind this rule -- more commonly known as “the Fiduciary Rule”-- is a laudable one: anyone providing advice about the management of retirement assets must act in his or her client’s best interest. Previously, advisors were permitted to provide counsel while receiving commissions -- a  compensation model steeped in potential conflict and prone to misuse.

The Fiduciary Rule’s enforcement of a higher standard is a step forward for all Americans hoping to secure their financial future.

However, with change comes challenges. It’s no surprise that regulatory shifts are often accompanied  by implementation difficulties and operational uncertainty. Any established assumptions on distribution, market dynamics, and value to the end-customer must be reassessed. Financial institutions that act strategically to understand and navigate the new framework position themselves to capitalize on the initial wave of change.

Beginning on April 10, 2017, the Fiduciary Rule will go into effect. How this affects the retirement services sector is anyone’s guess, but two predominant themes have emerged. First, there is a belief in the continuation -- or even acceleration -- of the transition to low-cost, index-based vehicles. This seems all the more likely given the ruling’s focus on the overall cost of investing as a key driver of the “best interest” standard.  Second, the expense of selling into this market is anticipated to rise as the increased cost of compliance exerts a heavier weight on distribution budget lines. The predicted margin squeeze from both sides of the P&L is compelling all players to evaluate highly effective, scalable solutions -- in many cases from new entrants -- that counter these forces in a meaningful way.

Enter True Link.

In developing its investment advisory services, True Link has again demonstrated its leadership role in delivering technology-driven products and services for retirement-aged individuals. We’ve created a user-friendly, client-facing portal specifically attuned to this demographic’s financial needs, and strategically positioned to adapt to the complex compliance challenges that will surface in the early months of the Rule’s application. As the industry works to get required protocols in place, including those involving the BIC exemption, True Link stands ready to support our partner organizations in developing the oversight programs and systems that meet their needs.

True Link’s balanced pairing of technology and human expertise forms the basis of our brand promise to our customers. Additionally, we believe this pairing represents the most effective path forward for the industry relative to the Fiduciary Rule. Stay tuned as we near the Rule’s implementation date and dialogue on the issue heats up. True Link will continue to participate in the conversation, providing detail on our philosophy for a more ethical financial services industry, the technology we put behind this goal, and the  possibility of a new path forward under President-elect Trump’s administration.

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