Financial advisors have watched warily as the Department of Labor’s new Fiduciary Standard worked its way through the regulatory maze. They’ve either assumed industry lobbyists would water it down or Congress would block it permanently. When neither of those things happened, many advisors have remained mired in fear and paralysis. Observers suggest this is not a formula for success in the new fiduciary marketplace.

A article urges advisors to take action now to adjust their business models in light of the impending fiduciary standard. In 3 Steps to Prepare for DOL Fiduciary Rule,” journalist Emily Zulz tapped the brains of two industry leaders, Raef Lee, Managing Director of SEI Advisor Network, and his SEI colleague John Anderson, Head of Practice Management Solutions. Both strongly suggest advisors take immediate steps to adjust their business models, even though the final shape of the new standard remains unclear.

Lee and Anderson recommend advisors follow a three-step process. First, they should proactively speak with their clients about the impending shift. Anderson recommends saying something like: “You’re going to hear about something called the DOL fiduciary rule. Let me tell you a little bit about what that looks like and how it will change our relationship. It won’t necessarily be better or worse, just different.”

Anderson says this is also a good time to restate the advisor’s value proposition and to explain additional things the advisor can do for the client as a fiduciary. He also believes it’s crucial to provide a positive spin rather than let clients panic.

The second step is for advisors to evaluate their client base and place customers into three buckets. The first consists of those the advisor plans to move from a commission arrangement to a fee arrangement. The second includes clients who for some reason should not move toward fees (example: those subject to variable annuity surrender charges). The third comprises those for whom it will no longer make economic sense to serve in the future. In the last case, advisors should consider alternatives such as referring them to a robo-advisor or to a custodian and then schedule annual review meetings at an hourly rate.

Stress the Win/Win

Regardless of buckets, advisors must also be ready to explain what the new fiduciary standard means to them personally in a non-threatening, win/win manner.

The third step is for advisors to evaluate their technology platform and procedures to make sure they can support a fiduciary practice. Crucial in this regard is the ability “to (illustrate) the path by which you guided your client,” Lee says. “So many people start with a pad and paper and say ‘Let me show you what’s going on.’ Well that’s not compliant.”

Lee adds that having an integrated CRM and technology workflow system within the office will more effectively smooth how advisors transition to a fiduciary marketplace than simply storing business procedures in their heads.

What Lee and Anderson don’t discuss is the liability implications of migrating to a fiduciary standard. Because clients will now truly expect “in-their-best-interests” advice, they may be more inclined to complain and/or sue if they receive conflicted advice. EOforLess recommends all advisors transitioning to fiduciary status to review their current E&O insurance contract to make sure it fully protects them. And if they don’t have E&O insurance currently, they should consider buying coverage well before the new fiduciary standard becomes effective.

For information on affordable errors and omissions insurance for low-risk insurance agents, investment advisors, and real estate broker/owners, please visit For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.