One of the discussion topics trending on Wall Street today is the fate of the Department of Labor’s fiduciary rule. Implementation of the rule was once considered a foregone conclusion but change in the Oval Office has reopened debate on the matter and the only thing certain at this point is more uncertainty.
Some financial companies and advisors have gone on the record stating that no matter what happens to the fiduciary rule, their plans to transition to a fiduciary standard is an irrevocable decision. Their argument for staying the course is less centered on the considerable time and money they spent preparing for the change and more focused on the spirit of the rule which is placing client interests first.
Advisory Teams Embrace Change
While many sole practitioners will continue with a wait-and-see strategy, top financial advisory teams stand to benefit regardless of what action the Trump administration pursues. The reason for this is simple: advisor teams elevate the standard of advice they provide by design, not by regulatory mandate. Their willingness to collaborate together and merge multiple areas of expertise has nothing to do with Big Brother looking over their shoulder and everything to do with putting their client’s interests first and above all other considerations.
The multi-dimensional structure of an advisory team helps avoid even the appearance of impropriety regarding fees and commissions because investment advice offered is collectively assimilated and therefore less subject to conflict of interest concerns that might worry sole practitioners. Advisory teams also tend to be viewed by investors as more client centric which elevates investor trust and confidence. Another benefit of an advisory team is its ability to provide greater overall value to clients and especially to those with more complex dimensions of wealth.
Evolution Brings New Opportunities
If the DOL fiduciary rule is preserved in whole or part, expect the number of solo practitioners to decrease because many lack the capabilities and licensing required to make the transition into a higher standard fiduciary environment. One of the domino effects will be an increase in new client acquisition opportunities for advisory teams because they offer the multi-tiered skill sets investors will be seeking and individual advisors will be struggle to provide.
The change in the Oval Office and how it impacts the DOL fiduciary rule is a topic with more questions than answers. One thing that will not change is the importance of communicating value to clients. In a profession over-saturated with generalists, advisory teams stand to benefit because of their ability to provide a more comprehensive menu of specialized services. Their value propositions will strengthen as those of solo advisors are diminished.
Change is inevitable in financial markets and investor confidence is easily rattled when political administrations transition. Communicating how your advisory team leverages change in ways that favorably resonate with client interests will be critical to success in the coming months and years. Your value proposition will become increasingly important and knowing how to communicate what makes your team different and better in the evolving financial marketplace is the topic of next month’s Coach’s Corner.