By James Morris, Questar Branch Office Designated Supervisory Principal at Ann Arbor Annuity Exchange
Even in the best of times, changing broker/dealers requires a lot of time and many considerations. With the Department of Labor fiduciary rule applicability date of April 1, 2017, but facing numerous legal challenges that could change or overturn the rule, the financial services industry has entered a period of regulatory uncertainty. Broker/dealers are greatly affected by this uncertainty, and are taking different approaches to adapting to this changing environment. As a result, right now might be either the best of times to change broker/dealers, or possibly the worst of times.
Here are a few scenarios that you may be contemplating:
1. Should you drop your securities registration?Depending on the outcome of the various efforts to modify or overturn the DOL rule, the way financial professionals service qualified accounts may need to change. Considering the uncertainties about how regulations may ultimately change, it would seem that maintaining an active securities registration and being able to offer a variety of products and services to clients, rather than limiting the choices you can offer, would be an asset.
2. Is your current broker/dealer DOL-ready?
Broker/dealers have been aware of the pending DOL rule for years and some have been anticipating how they would conduct business if it were to become an active rule. Now that the final rule is out, some broker/dealers are taking a proactive approach in getting ready to comply with the rule, while others are taking a wait-and-see approach. If you are currently affiliated with a broker/dealer, I encourage you to ask your Compliance Department how the rule will affect your current firm, what changes they will make to comply with the new rule, and what that will mean to your business.
3. Should you stay put at your current broker/dealer?
If you would like to change broker/dealers but have the option to stay until compliance with the rule has been implemented at your current firm, it may be best to stay put. Because there are so many unknowns concerning how individual firms will comply with the rule, working through the firm you know, rather than adding another variable to an already big decision, may be better for you.
4. Should you change your broker/dealer?
For a variety of reasons, changing broker/dealers may be necessary. If you are interviewing new broker/dealers, be sure to have a clear understanding of how the firms you are considering will comply with the DOL rule. At a minimum, your interview process should cover fees, payout structures, products, errors and omissions insurance, and documentation your clients will need to complete.
5. Could this be the best time for you to change your broker/dealer?
Because the DOL rule has not gone into effect yet, it is still business as usual. The rule will affect the compensation structures broker/dealers are able to offer, potentially including forgivable loans, payout percentages, and other enticements currently offered to persuade representatives. When the rule goes into effect, it is reasonable to assume that offers to change broker/dealers will be affected. If you currently have an offer to change broker/dealers, you may not receive a better offer in the future.
The DOL rule, its impact, and how broker/dealers and insurance carriers will conduct business under the new regulations are still being researched. Remember to assess your business plans and goals, perform your due diligence, ask all of your questions up front, and make sure you are making the best move for your practice.
If you would like to discuss any changes you are considering, please give me a call. 800.321.3924
James Morris | Designated Supervisory Principal
Questar Capital Corporation Branch Office at AAAE
Ph: 800.321.3924 x159 | Dir: 734.786.6159
Securities offered through Questar Capital Corporation (QCC). Member FINRA/SIPC. Advisory services offered through Questar Asset Management, a registered investment advisor. Ann Arbor Annuity Exchange is an affiliate of QCC.
Designed for Financial Professionals.