Fiduciary rule will strengthen adviser, recordkeeper relationship

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With the final fiduciary rule implementation active June 9, retirement plan advisers still receiving commission as compensation would be wise to strengthen their relationships with recordkeepers, asset management experts say, in order to provide clients with a tangible justification for their payments. Recordkeepers have access to rich plan data, the experts recently told attendees at the SPARK Institute’s National Conference — and advisers must take advantage of it.

Mike Shamburger, head of territory sales at T. Rowe Price, and Sharon Scanlon, senior vice president at Lincoln Financial, told attendees at the Oxon Hill, Md., conference to identify and overcome challenges among distribution partners in gathering participant data, and emphasized the need for brokers and recordkeepers to come together in the wake of the fiduciary rule implementation to ensure advisers are utilizing all resources to provide strong client support at justifiable cost.

With the new rule intact, advisers can continue to work on commission, but will need to provide clients with a disclosure agreement, called a Best Interest Contract Exemption (BICE) in circumstances where a conflict of interest could exist. Shamburger said there could be many small-market plans in need of this agreement.

“A lot of the traditional retirement specialist advisers have their focus around building multiple service models for different types of clients that are revenue-friendly to them,” Shamburger said. “The other big challenge I see is how many plans, especially small-market plans, are tied up in a traditional commission, broker-dealer environment.”

Also see: "Fiduciary rule enactment could bring adviser consolidation."

Such advisers who are continuing to work on a commission-based program will have a difficult time complying with the Department of Labor. “We are going to have to figure out how to grow future emerging advisers to adapt to this space or manage the risk associated with [commission-based] plans,” he said.

The BICE does guarantee to the client that the adviser is working in the best interest of the client. However, all compensation paid to the fiduciary must be clearly spelled out as well, which can include advisers receiving a higher commission or special bonuses for selling a certain product.

Continual data feed
Because the DOL requires that all fees and commissions be clearly disclosed in dollar form to clients, Scanlon said the best way to show clients are receiving their money’s worth is to provide clients with constant data to show how the adviser-led initiatives are impacting their company’s retirement plans.

“Anything [recordkeepers] can do to provide tools and data so that advisers can clear through the clutter I think will assist [plan participants] in identifying the value [of adviser services],” Scanlon said.

Scanlon added that without participation data from recordkeepers, the ability to justify the fees of retirement advisers will prove difficult if the client does not continue to see positive growth within the retirement plan provided.

She reiterated that a stronger relationship between advisers and recordkeepers will make it easier to identify the gaps within retirement plans and then offer service models necessary to tighten those gaps, but acknowledged it is not always easy to come by the data.

“There is no secret sauce or consistency of data being sent out to assist brokers,” Scanlon added. “I think that will continue to be a challenge for our industry going forward that we all need to work on together.”

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