These moves will help structure your firm to meet the Department of Labor’s conflict-of-interest regulations
May 3, 2016 @ 1:54 pm | By Blaine F. Aikin | Investment News
Sales and advisory organizations are fundamentally different. That is the premise of the Labor Department’s new conflict-of-interest rule. They have different priorities, which shape the culture and practices that exist in each. Consequently, they must be regulated differently and should be distinguishable to the public.
Advisory firms (whether in law, medicine or financial services) must be structured to optimize client outcomes, even as they seek to operate profitably. Sales organizations are structured to maximize profitability, even as they seek to produce positive customer outcomes. The priorities of these businesses are reversed. Advice is inherently a fiduciary function, sales is not.
YOU’LL NEED EVIDENCE
The conflict-of-interest rule is intended to help make sure professional advisers operate their businesses to optimize client outcomes: They must deliver objective, competent advice by design. If your actions as an adviser are ever brought into question, you will need to be able to show evidence of well-defined, consistently applied decision-making processes that are grounded in fiduciary principles and deeply ingrained in the culture of your business.
“Always, but especially in this day of lawsuits and ever increasing regulations, the responsibility for a financial advisor t do their own due diligence on products they sell falls squarely on themselves. No one is going to take greater interest in protecting their practice than they are. We use the Blue Vault Partners Nontraded REIT Review to keep us informed of the performance of every single nontraded REIT. Finally, complete transparency is available for advisors using nontraded REITs. Every advisor using REITs in their practice should make the small annual investment of subscribing to Blue Vault’s reporting services.”