So it’s official. The DOL Fiduciary rule is a thing of the past. For many of us in the financial industry, it consumed a lot of our time, energy and resources for the the better part of three years. You couldn’t turn anywhere in the financial news media without seeing it. Yet, its ultimate demise was rather anti-climactic. It died rather quietly compared to all of the noise it made early on.
I had written a piece for Investment News a while back titled DOL Rule: What’s wrong with the Financial Advice Industry. The point of the piece was to share a few simple thoughts about what I felt was right and wrong about the rule. I still feel the same today as I did then. Hopefully the SEC will introduce a rule that is workable for the industry while addressing the heart of the matter: do what’s best for clients.
The Heart of the Matter
Do what is best for clients. Seems simple, right?
It’s far more complex than that. It’s the reason that the DOL rule (R.I.P.) and the newly proposed SEC rule required more than 1,000 pages each as they struggled to define “best for clients.” It appears as though that definition is fuzzy. The problem is that rule makers want something black and white, which (in my opinion) is the reason that the “lowest/cheapest fee” argument was the easiest thing for them to attach themselves to when attempting to define “best interests.” Anybody who understands the complexity of the financial industry knows how problematic this can be.
What do Groceries Have to do with this?
I frequently shop at a local grocery store around the corner from my house. We don’t do all of our grocery shopping there, but for quick trips to get many of the basics, this is where my family turns. We do this for a couple of reasons. We happen to like some of the produce there, and the convenience of it being really close to the house (with easy parking) makes it simple.
The big regional/national grocers are an extra 10 minutes away. We do some of our big shopping trips there, but it tends to be something that is planned out in advance (considering we have two little girls that need to be factored into the equation).
Once in a great while, I’m tasked with running out late to get milk or one of the household “necessities.” The gas station on the corner tends to be my “go-to” solution. It’s a quick and easy stop with the added benefit of actually being open at 11 PM.
In each of the above examples, it wouldn’t be uncommon for me to purchase milk during those grocery trips. Our girls are turning into milk-junkies. The cost for a gallon of milk at each of those places varies dramatically. One could argue that the gallon that costs the most (from the gas station), may be the least fresh. But that doesn’t stop me from making that purchase when I need to.
As a consumer, I’m making those purchases based upon something other than price. I’m placing a value on convenience, flexibility, service, and the added benefit of buying local vs. a national chain. Sometimes I think about and look at the price I’ll be paying, but I’ve got enough experience and knowledge to understand that I’ll be paying more in exchange for things that are more important to me at that moment than dollars and cents.
After the tax reform bill passed, my team created a seminar focused on some of the most recent changes affecting the financial lives of those 50 years and older. I wrote about the opportunity that it presented in a blog post titled 6 Ways to leverage tax reform in your marketing strategy. The focus of the seminar was on three recent law changes:
- The Social Security claiming strategy changes
- The DOL Fiduciary rule
- Tax reform bill
When the DOL rule officially became a thing of the past, I was immediately asked “well are we going to pull that from the presentation?” The question was a valid one that I had received from a number of advisors. I think the expectation was to simply remove that section and just go back to doing things the way we always had.
The death of the DOL Fiduciary rule gives advisors an incredible opportunity. We’re provided with the opportunity to educate consumers about how the financial industry works. And while it’s a bizarre analogy, we can share with them the difference between the gas stations, the local grocers and markets, and the national chains. ALL of them have their place within the industry.
We simply need to do a better job of helping consumers arrive at their buying decisions logically, regardless of whether they are buying an investment or a gallon of milk.
Explain what a fiduciary is. Explain why your clients see value in doing business with you. Be transparent. Help them to understand a little bit about the industry and where you fit in. In a world that is going increasingly digital, I’m firmly convinced that there will always be a strong need and desire for financial professionals that want to build relationships with their clients, while helping to hold them accountable for the things that need to be done to help them reach their goals.
We’ll get a fiduciary rule someday. For now, we’ll have to rely on the financial professionals that can objectively explain how the different aspects of the financial industry impact to the very consumers it is there to serve.