As the Department of Labor debated the fiduciary rule and heard concerns from the industry, many expected much stricter guidelines than the ones released on April 6, 2016. The Department of Labor adopted many exemptions and carve-outs that still allow Brokers to receive commissions but attempt to hold them to a higher fiduciary responsibility. Brokers are now more liable for products they recommend and sell than in the past due to the implementation of the B-I-C-E, Best Interest Contract Exemption. Even though the final ruling is much more lenient than the previously proposed fiduciary rule, it has still caused a lot of backlash within the financial industry. Many financial professionals who receive commissions still oppose the rule because of the potential liability. If you’re a broker, you should start to think about different business practices you can implement so you’re not affected by government rulings in the future.
As a broker you could see a dip in your commissions. Eliminating conflicts of interest, fully disclosing what you’re selling to your client, and how much commissions you’ll receive from that sale, could hurt your bottom line. Your clients will slowly become more and more aware of the conflicts of interest presented to them and could very well result to different means of financial advice.
Now is the perfect time to reexamine your business model. With the fiduciary law almost finalized you can get ahead of the game by switching to a more elegant fee-only business model. As a fee-only advisor you operate within the best interest of your clients. Your business will have a stronger foundation and you have more freedom to operate it.
If you choose to switch your business model, you’ll operate under less restrictions. You are free to charge whatever fees best fit you, your business, and your clients. Your clients are fully aware of what they’re paying and lean on you for sound advice in many aspects of their lives. As a fiduciary you allow yourself to advise with a free conscience, making you more present and available to your customer. This increases your value proposition and builds a strong and loyal client base.
Here at True Measure, we like to use the “franchise analogy.” If you’re a broker, you can compare yourself to a franchise owner. If you own and operate a franchise, you’re hindered to many restrictions and fees. You can only sell products under that franchise. As a fee-only advisor you’re free to operate as you please. In fact, True Measure has designed specific programs to take you from a salesman for a franchise company, to a business owner, operating your own 7-figure entrepreneurial business.
Choose your clients
As an entrepreneur, you can choose exactly who you want to work with. At True Measure we don’t work with PITA clients. PITA stands for “pain in the…” (you get the picture.) We recognized many years ago that difficult clients cost time and money. As a fee-only advisor you can work with who you want and clients who are willing to participate and be upfront about their financial picture. Our programs also teach you how to manage yourself and clients to maximize productivity and profit for both you and your client base.
If you are willing to learn and take action, there are many practices you can put in place to maximize your profit. Instead of enduring the repercussions of the fiduciary rule, start thinking about embracing it.