Investors may forgo the use of brokers altogether by pursuing low-cost index mutual or rolling retirement savings into products like fixed annuities, both of which can be completed without a broker.
It comes down to this: brokers will have to re-think their selling strategies, juggling demands from regulators, clients and insurance companies while also attempting to stay profitable.
Brokers will need to spend more time familiarizing themselves with client needs and making recommendations based on these, making sure there is a clear record that due diligence has been done to satisfy fiduciary requirements.
Rather than accepting commission-based lower income clients, they will need to gather more high-income clients.
Brokers may have to have expensive training and more licenses to continue selling some products. They can communicate more trustworthiness to clients by adding credentials to their titles, like CPWA, CFP, QPFC, AIF and more.
Examine Sales Tactics
Cautious brokers already taking the time to look-out for investor’s needs and recommend appropriate products will only feel a minimal impact from the proposal.
Other brokers, from those either cutting corners for the most profitable sell to those providing services primarily for middle and lower-income investors may feel the brunt of new fiduciary legislation. These groups may want to tweak their business models and adopt new methods for serving clients within the constraints of the new rules.
Adapting to the rules is not as cut-and-dried as eliminating certain products and advocating others, or even just changing how compensation is disclosed. Rather, it’s requires a global look at how brokers can continue to best serve clients.
Regardless of your strategy, you can use this as an opportunity to show clients your worth—that broker advice is trustworthy and useful.
In advising your clients, demonstrate your expertise and build rapport with each one. By walking-alongside them and providing access to individually-tailored products, you can continue to build client loyalty and become their long-term resource.
Salisbury, I. (2015, Feb. 23). Obama to Wall Street: Stop acting like car salesmen. Time. Retrieved from http://time.com/money/3718640/obama-advocates-fiduciary-standard/
United States Department of Labor. (2015, March 9). Updating our Retirement Protections. Retrieved from http://www.dol.gov/featured/ProtectYourSavings/Updating-Protections.htm
The White House. (2015, Feb. 23). Remarks by the President at the ARRP. Retrieved from http://www.whitehouse.gov/the-press-office/2015/02/23/remarks-president-aarp
Ebeling, A. (2015, Feb. 23). Obama attacks advisors selling snake oil, lauds new DOL fiduciary rule. Forbes. Retrieved from http://www.forbes.com/sites/ashleaebeling/2015/02/23/obama-attacks-advisors-selling-snake-oil/