The Department of Labor’s fiduciary rule has advisor stress levels rising daily. I’m often asked by advisors what exactly they should be saying to clients in regards to the DOL ruling. In response, I developed the following verbiage for addressing DOL with clients. Modify it to fit you, your clients and your own style.
I would suggest you begin by dividing your DOL list into three groups. The first group consists of the clients who typically follow your advice without question. In the second group, are the clients who will require some sales work on your part and the last group consists of clients who would not transition to a fee-based platform if they’re life depended on it.
Begin with your low-hanging fruit so you have an opportunity to perfect your presentation before moving onto the people who will require some selling. This will help to prepare you for your discussions with this second group. Finally, you must make a decision on the third group. If you choose to utilize your call center for some clients in this group, think of it as another level of service your firm provides smaller clients. Call centers have come a long way and clients can usually get their questions answered by a competent, registered individual.
Begin now. I can’t stress this enough! The last thing you want is to be dealing with DOL during tax season. View DOL as an opportunity rather than a burden. This is a golden opportunity to transition clients into a fee-based platform and uncover additional assets you can work on consolidating.
Sample DOL Verbiage:
The Department of Labor recently passed a new law that establishes a new Fiduciary standard for retirement accounts including IRAs. Prior to the law, brokerage firms were subject to the Suitability standard which means that advisors made recommendations that were suitable for the client. This new Fiduciary standard takes the suitability standard a step further to assure that advisors focus only on what’s best for the client.
So your first question may be, haven’t you always done what was best for me?
And the answer to that is yes but not all advisors have done business like that so the government passed this new law to be sure that they all do going forward.
In anticipation of this new law, I have been transitioning my clients to an advisory relationship which already operates under a fiduciary standard. In this platform, you don’t pay commissions on every transaction you make. Instead, the cost is based on the value of your account. It’s generally around 1% annually depending on the value of the account and we’re free to make changes in the account whenever and wherever we need to without ever having to pay a commission again.
I’ve actually been using this platform for quite some time with most of my clients but some clients wanted to stick to the old transactional model so I tried to accommodate them wherever possible. However, with the markets and the world so volatile these days, I believe it’s in the best interest of clients to move to the advisory platform exclusively. It allows me to be more flexible and take advantage of market opportunities far more quickly and efficiently.
In the future, clients who continue to do business the old transactional way are going to have to call their advisor to put in a trade, the advisor will have to send them something to sign saying they agree to the trade. The client will then have to get it back to the advisor before any trade can be entered. So, the old transactional way of doing business is just not going to be viable anymore because markets move too quickly these days.
So what questions can I answer for you?
Ok, so all we need is a signature here and here.
If phone call: Ok, so I’ll get that paperwork in the mail to you today with a return envelope. Please get it back to me just as soon as you can so I can make the change and of course, if you have any other questions, by all means please call or email me.