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Planning for the DOL Fiduciary Rule: Ignore the Noise, Focus on Your Data

Planning for the DOL Fiduciary Rule: Ignore the Noise, Focus on Your Data

My last post discussing the fate of the DOL Fiduciary Rule proclaimed that I was ready for the final episode of this soap opera to air regardless of the outcome, as long as there is one. Well, the June 9th deadline has come and gone, and parts of the DOL Fiduciary Rule are now in effect. However, the cloud of uncertainty hanging over the future of the rule means the show has been renewed for at least another season. The one thing that does seem to be certain, however, is that the fiduciary rule will be significantly altered in the coming months.

The path that the Department of Labor Secretary Acosta eventually chose ― with letting the rule pass ― avoids costly and distracting federal lawsuits that challenge the legality of further delay, but allow real change to the rule to be planned and executed in the near future.

A recent example of this focuses on the Best Interest Contract (BIC) in the version of the rule currently in review. The BIC forms the path for legal action to remedy a client’s or participant’s dispute regarding insufficient disclosures. The BIC may meet the chopping block in order to remove teeth from the rule, but the disclosures will likely remain.

According to The Wall Street Journal, who covered these developments earlier this week, the DOL singled out the BIC during its comment period, bringing it up as a main point of contention among commenters:

In opening a new comment period on the rule and a potential delay of its Jan. 1, 2018, deadline for full compliance, the agency asked pointed questions to gauge costs to the financial-services industry. Writing that commenters have been divided on best-interest contract requirements throughout the rule-making process, the department said that it “is interested in the possibility of regulatory changes that could alter or eliminate contractual … requirements.”

Judging from the many conversations I’ve had over the last few months, our clients are indeed aware of this reality ― yet they are still choosing to move forward under the assumption that that a fiduciary rule in some shape or form will be in force by January of 2018. From our perspective, regardless of the outcome, starting work on projects that will likely be required is a safe bet.

Regardless of its fate, DOL plans should focus on data

The certainty of this one point has enabled our clients to start work on projects that improve their ability to manage data, products and operations. The projects they have chosen to move forward with first are likely those that are required as core capabilities to meet a broad array of potential final requirements. The biggest benefit from this strategy is that moving forward with this lowest likely denominator has returned the firm’s direction to their DOL compliance program …  providing something to do after a long hiatus of progress as each shop sat becalmed in the doldrums of uncertainty. I can attest from my sailing experience that after sitting becalmed for a few days that wind, in ANY direction, is a welcome change of events.

Specific projects we see being green-lighted include:

  • Product data management capabilities that include data consumption, review and publish capabilities in support of disclosures
  • Data access improvements through strategic systems integration in support of product comparison and fee transparency
  • Updates to portal capabilities for access to the improved data and other basic reporting needs to audit compliance and report on the platform for future regulatory inquiries

Most of the deliverables of work recently initiated are centered on data that supports fee disclosure, compensation, levelization and reporting. The common denominator is that this functionality will likely be required regardless of the stringency of the final rules or which agency will be tasked with enforcement.

Contact us for more information about how we can help you stay ahead of the change.

Whitfield Athey
Whitfield Athey is CEO of Delta Data Software. His role at Delta Data is focused on growth of the product base, satisfaction of clients and scalability of the organization.
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