What independent financial advisers need from broker-dealers when it comes to the DOL fiduciary rule

Predicting what may happen to the Department of Labor’s fiduciary rule has become the industry’s favorite parlor game. Every week we see industry pundits, third-party recruiters and other consultants publicly opining about the rule.

And with each of the latest public predictions, anxiety potentially increases among many independent advisers who have been on pins and needles about where the DOL rule will ultimately land.

Unfortunately, too many independent firms have chosen to communicate on a minimal level with their advisers on all things DOL-related pending greater clarity.

Yes, the current DOL rule and implementation timeframe are what the industry must assume will be the case until the official word changes. Yes, there isn’t much more factual detail beyond that basic point that anybody can offer.

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But factual detail is just the tip of the iceberg when regulatory uncertainty strikes. As independent business owners whose livelihoods and client relationships will potentially be most impacted by the future of the rule, these advisers need and deserve more from their firms by way of engagement during this time period.

Here are the top forms of support that independent advisers should be getting from their broker-dealers right now:

1. Active engagement with advisers, with an emphasis on personalized, consultative meetings. Obviously, whether it’s the DOL rule or some other piece of regulation, firms can’t put their head in the sand and hope it goes away. By the same token, implementing top-down strategies to address these challenges are often ineffectual, resulting in solutions that are too broad-based to benefit more than a select few. Mindful of this, firms should actively create opportunities to consult with and engage their advisers directly about regulatory issues — whether it’s through regular electronic communications, carving out time at yearly conferences, setting up monthly or quarterly update calls or making home visits in the field. Of course, no IBD will have all the answers. But it is possible to gain a better appreciation of what advisers are thinking and, when possible, attempt to craft future policies and procedures to reflect such input.

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2. Frequent and candid communications that strike the right balance between admitting what the industry doesn’t know, while stating what might be reasonable for advisers to assume or expect. Some firms have their legal and compliance teams take full lead with field force communications about the DOL. Such communications tend to be conservative and succinct to the point of being terse. This sort of communications approach doesn’t help to quell adviser anxieties. By contrast, a more open approach could ratchet down the level of anxiety among advisers. For example, if a regulatory question is still unsettled, the IBD should admit it — but also state any related operating assumptions that the firm is making. In these communications, IBDs should pledge to follow up with advisers at a preset date, even if no regulatory clarity has yet been achieved, and then do so, even if it’s just to touch base and establish another update commitment. The fear of the unknown can be a paralyzing force, and IBD communications to advisers can mark a crucial difference between feeling like you have a true partner, versus feeling like you’re facing the unknown alone.

3. A strategic and operational approach that hopes for the best, but prepares for the worst. While we all lament the escalating regulatory complexities that have hovered over our space in recent years and hope the future will be easier to navigate, independent firms need to formulate and communicate about contingency plans that anticipate continued challenges and how they will be addressed. Just as it’s critical for students at a school to know what to do in the event of a fire, advisers need to know the worst-case scenario for their business vis-à-vis regulatory challenges and whether their IBD has such a strategy in place were that to occur.

The sad fact is that our industry likely faces a prolonged period of regulatory ambiguity.

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This is an opportunity for independent broker-dealers to step up and fulfill their ideal role as trusted partners and information providers to their advisers, who need such support more than ever right now.

Wade Wilkinson is CEO of Securities Service Network, an independent broker-dealer and RIA.