Yesterday, I attended the Securities Industry and Financial Markets Association (SIFMA) Department of Labor (DOL) Fiduciary Seminar in New York. This much anticipated event brought together members from across the finance industry with regulators and industry commentators.
As you may have seen in the news recently, the final DOL Fiduciary rule was released on April 6th, and this event was one of the first major gatherings to help businesses understand the vast implications of the new rule for retirement advice, as well as help financial firms in operationalization and implementation.
SIFMA has been actively engaged as the leading industry trade group representing securities firms, banks, and asset management companies. SIFMA also submitted comments and reports outlining the challenging operational implications of the originally proposed rules, and they are still in the process of reviewing the final rules.
Here are my key insights and takeaways from the session:
- Organizations should be preparing for readiness with the April 10th 2017 date in mind. For instance, although full compliance with the Best Interest Contract is not required until January 1st 2018, the ability to demonstrate impartial conduct requires action now.
- The definition of what constitutes a recommendation is a key anchor and pillar to the rule and this is in line with FINRA’s definition. This should be the key test when determining whether conflicts occur.
- Organizations should consider reviewing their current Conflicts of Interest strategy and start identifying a Chief Conflicts Officer, as this is a key component of demonstrating the advice is not conflicted.
- The technology solutions that firms use, particularly in the Customer Relationship Management (CRM) area, should be able to demonstrate that the organization is acting in the client’s best interest.
- Policies and procedures need to be put in place, but accompanied by compliance programs to provide control and oversight across all lines of defense. Monitoring and testing should also be a key component.
It is important for organizations to move beyond the analysis phase and start the implementation activities and readiness.
- Establish governance and setup program. Institutions should look to analyze and address impact due to the new rule. This has to be driven from the top and as such, a steering committee needs to be first established to provide a standardized response and strategic review. This will help define overall top-down governance (including roles and responsibilities) across the organization.
- Analyze current business strategy, inventory and product. A dedicated team of resources coupled with subject matter experts needs to be put in place to validate any impact identified and put together recommendations on the compliance strategy. The purpose is to not just merely comply, but create additional business opportunities, i.e. business operating model, strategic branding and vision for the wealth management business and others.
- Develop solutions on operational and IT framework. An operational review and changes should be implemented to achieve the target state model for the organization. People, processes and technologies should be reviewed, updated and created so that requirements of the regulation are satisfied and operational capabilities are being optimized to take advantage of the change.
- Build conversion and operational execution plans. With strategy and operational changes in tow, organizational readiness, communication, and training across groups will be paramount to ensure a smooth transition for conversion and a successful operational execution.
If you would like more information, please contact me, Hamish Wynn.
Visit the Accenture Regulatory Insights blog for more details on the Department of Labor Retirement Advice Fiduciary Rule.