Much has changed over the past week and, without a doubt, there is more ahead in the coming months. One change that has been widely discussed is a “pause” and potential reversal to all pending regulations, which could include the approved Department of Labor (DOL) Fiduciary Rule, effective June this year with a full implementation date of April 10, 2017. Because the Rule is final, it would take congressional action to reverse it; thus making unwinding the rule “possible but not probable”. On the other hand, there are those of the opinion that a wait and see approach is more appropriate, based on promises made during the presidential campaign. The truth is that no one knows for sure. In light of this uncertainty, how should firms proceed with implementation of the requirements of the DOL Rule?
What to do now?
Many companies have already changed compensation systems or otherwise implemented and announced changes to comply with the DOL Fiduciary Rule. For those, staying the course is without a doubt the best decision.
In nearly all instances, with the full implementation date less than five months away and much to do before then, it would be imprudent to do nothing. The most reasonable path forward is to continue planning with April 10, 2017 as the date of full implementation.
While there is little time to delay, for those who are yet in early stages of readiness for April 17th it may be reasonable to amend the implementation plan by reviewing the unfinished tasks and reprioritizing them based on the needs of the organization and its clients, advancing to the top of the list those items that are desired regardless the state of the regulation. As a general proposition, any task that meets the criteria of best interest of client and protecting firm reputation, goes to the top of the priority list.
For example, one necessary project is reviewing the compensation system to assure that it is not unintentionally driving unwanted behavior of agents / producers. Regardless of regulatory requirements, in light of today’s consumer expectations and transparency, this is something that should be done periodically to best serve clients and protect the organization’s reputation.
A second work-stream, training agents and producers on new rules, is also likely high on the implementation list. Recommendation: Schedule the date of training but delay developing content; same for communication plans. Either or both can be cancelled or re-purposed with minimal disruption. Even if the regulation is quashed, you always have other things to discuss with agents. Schedule a date for training in March, using a title such as “Regulatory Update” and wait until late February to see what is actually happening, this will leave time to develop the content.
Finally, if you are using the countours and intended outcomes of the DOL Fiduciary Rule to make desired strategic and products changes to your operations – proceed as planned. Activities to consider delaying would be changes made specifically to comply with the DOL Fiduciary Rule, but which would not be made if not for the Rule. For delayed activities, work backward from the April 2017 implementation date; calendar the latest date that you must begin making these changes to be compliant in the event that the rule goes into effect as currently scheduled.
Running a business in an environment of uncertainty is not ideal, nor is it without precedent. Using the company’s values, reputation, and the clients’ best interest as guideposts will help chart the right course.
