In our recent blog series on complying with the DOL Fiduciary Rule, we’ve already explored three of the four actions advisors can take to remain compliant with the new legislation: closing accounts, transitioning to a robo-advisor and converting to a managed account. This post is focused on the only compliance action that will allow commission accounts to stay “as is:” executing a Best Interest Contract Exemption.
Since the Fiduciary Rule is designed to ensure that clients receive the best investment advice and that advisors don’t receive unfair commissions, keeping a brokerage account “as is” requires an initial investor-advisor conversation, a signed contract and ongoing communication each time an advisor provides advice.
The BIC option is likely the most complex compliance option with several moving parts:
- Initial communication from the advisor explaining the impact of the fiduciary status and how they as an advisor and the firm are compensated
- Generating and executing a signed BIC that discloses compensation structures with client attestation
- As the client relationship continues, advisors must track when advice is given and when product changes are made, all with the required documentation
- Ongoing, regular reporting that provides a full disclosure of fees, costs, performance and any potential conflicts of interest, by product and client
Due to the complex nature of proceeding with commission accounts in this new fiduciary environment, firms must provide advisors with robust tools that not only allows them to execute the initial BIC, but also enables them to remain complaint throughout the client relationship. This means firms must offer client communication tools, documentation generation/execution capabilities, audit trails for proving compliance and dynamic/flexible reporting features that assess various information on the accounts, including breakdowns of transactional and ongoing charges.
If a BIC lite approach is better suited for your client, the DOL Advisor Toolkit also includes the compliance actions and administrative functions necessary to execute.
The DOL Advisor Toolkit does all this and more. To see it in action, download our demo webinar now.