How Prepared are Wealth Management Firms to Address the Department of Labor's Fiduciary Rule?

By Rob Klapprodt, Corporate Strategy Officer


Here at Vestmark we know we need to vigilantly monitor how new or updated industry regulation impact how our clients do business. So recently, in light of the Department of Labor’s fiduciary ruling, specifically, the Best Interest Contract Exemption (better known as BIC), we thought we should gather some data about how prepared related businesses were feeling related to this.

To do this, we polled attendees at a recent Vestmark webinar that focused on the impact of this ruling, leveraging the fact that with more than 100 RIAs, Broker Dealers, Banks, Insurance Companies and Asset Managers responding, we’d get meaningful data from a diverse set of folks across the financial investing industry.

We asked, for example, “What is your firm doing to start the compliance effort?” and found it interesting that a clear majority, 60%, are only now at the point of putting together a committee to understand the impact, and 12% have actually made no progress at all.

Similarly striking, we found that a significant percentage of people, 37%, feel behind in technology, with 21% feeling they’re “not at all prepared” for accommodating these changes. In fact, viewed another way, only 9% of respondents said they felt prepared to deal with the DoL ruling.


So what do we take away from these findings? For one thing, it seems clear that firms recognize how critical adding efficiencies to their business models will be achieving DoL compliance. Numerous administrative areas will need to be assessed such as establishing the appropriate agreements with clients, determining the advisory costs to the client and revenue arrangements with partners, and instituting controls, oversight and auditing requirements of a fiduciary under the new DoL rule. Taking on these tasks with outdated, manual processes will simply be too error-prone and impractical.

However, at the same time, firms are recognizing that with the right technology, they can create a viable operating model for advising retirement accounts. And though adopting such technologies comes with some learning curves and expense, there’s tremendous added value as firms realize overall improvement to their operations.

By Rob Klapprodt, Corporate Strategy Officer