I\u2019ve been hired by a couple of broker-dealers in how to develop a plan to comply with the new fiduciary rule. Unlike some of my competitors, all of my fees are based on a flat fee (cheap plug here).<\/p>\n
I\u2019m often asked how a broker-dealer can meet the standard of the fiduciary rule when it gets implemented. \u00a0Don\u2019t expect me to give the store away and provide all the trade secrets in a secret blog, but I believe that the new fiduciary rule is going to radically change a broker-dealer\u2019s business when it comes to being a plan fiduciary.<\/p>\n
Saying that you\u2019re just going to slap the fiduciary definition on yourself isn\u2019t enough and getting a best interest contract signed isn\u2019t enough because there are issues dealing with fees and individual brokers that have to be worked on. When it comes to trails from mutual funds being paid to brokers, I don\u2019t think many broker-dealers can get a handle on what fees are actually being paid, it\u2019s almost like peeling an onion when you\u2019re dealing with an alphabet soup of share classes and different forms of remuneration. Any broker-dealer is going to need to identify what fees they are getting if they have any hope of meeting that best interest exemption.<\/p>\n
Another issue is what I call \u201cthe dumbest person in the room\u201d. I worked in many different types of businesses and I\u2019m always concerned about the dumbest person in the room that could entail issues that could create potential liability. When it comes to a broker-dealer, there are many brokers who knew the ramifications of working with retirement plans and there are some who just don\u2019t have the knowledge and for one reason or another, won\u2019t get that knowledge. I believe that getting ready for the fiduciary rule is putting a system f checks and balances in place to avoid the broker-dealer getting sued because the broker who is \u201cthe dumbest person in the room\u201d is doing something they aren\u2019t supposed to do.<\/p>\n
These are just two ideas that broker-dealers need to think about before deciding what to do. For further questions on how to meet the new rule, please give me a call.<\/p>\n
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