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Analysis

Five steps towards Conflict of Interest Rule readiness

Preparation for operations leaders

On April 8, 2016, the Department of Labor (DOL) published the Conflict of Interest Rule (the “Rule”) in the Federal Register. Since the Rule was announced, firms are weighing a number of decisions that may have an impact on their business and operating models. But operations leaders don’t have to wait to act. There are five steps that can be taken today toward meeting regulatory compliance.

The DOL Rule

The DOL Conflict of Interest Rule is designed to protect retirement investors by ensuring that financial advisers, their firms, and their affiliates (advisers):

  • Act in their clients’ best interests
  • Mitigate and/or prevent conflicts of interest

To mobilize around these two key themes, advisers have begun thinking about how they will change policies, procedures, operational processes, and technologies to accommodate the Rule.

Unlike other regulatory changes affecting the retirement industry, the Rule has forced financial services firms that provide retirement services to assess the regulation’s impact across the entire business model.

While the Rule has a broader impact on the retirement industry when compared to prior regulations, regulatory compliance requires firms to rely on existing skill sets and implement a familiar regulatory implementation playbook (i.e., build business requirements, implement process change, develop new tools, and train employees to handle the new regulation).

Due to the tight implementation timeline, ops leaders should prioritize deliverables for the April 2017 and January 2018 deadlines. Managers may consider implementing stopgap solutions that are manual, yet compliant in the short run, while instituting additional controls in the interim until long-term automated solutions are realized.

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Day one requirements

Although the DOL’s Conflict of Interest Rule may seem ambiguous at times, there is clarity in some areas where operations leaders can begin implementation work now. Four of those potential areas include:

  • Mapping exemptions to current operations processes
  • Preparing to manage best interest contract (BIC) negative consent
  • Designing a retirement advice repository
  • Build a disclosure on-demand engine that provides an automated view into fees

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Five steps to getting started

Ultimately, once the business has made key decisions, operations leaders must be prepared to respond quickly and implement plans for the April 2017 and January 2018 compliance dates. Following the initial sprint of setup and implementation activities, firms will transition into business-as-usual mode.

To prepare, operations leaders should take five steps to ensure Rule readiness:

  1. Prioritize April 2017 and January 2018 implementation work
  2. Identify the different implementation alternatives
  3. Identify the cost to implement each alternative
  4. Evaluate the alternatives and provide a recommendation
  5. Make a decision and initiate an implementation plan

While the DOL’s Conflict of Interest Rule is complex and sometimes ambiguous in nature, it presents an obstacle that the industry as a whole must overcome. The Rule will produce both strategic advantages and disadvantages, thus differentiating competitors from one another. For this reason, business leaders at retirement services firms are carefully weighing the risks and rewards associated with significant compliance decisions.

To learn more, read the full report, Five steps towards Conflict of Interest Rule readiness, and visit our dedicated DOL Fiduciary Rule page.

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Get in touch

Susan Levey
Managing Director | Deloitte Advisory
Deloitte & Touche LLP

Maria Gattuso
Principal | Deloitte Advisory
Deloitte & Touche LLP

Karl Ehrsam
Principal | Deloitte Advisory
Deloitte & Touche LLP

Daniel Rosshirt
Principal
Deloitte Consulting LLP

Subrahmanyan Ramnath
Managing Director | Deloitte Advisory
Deloitte & Touche LLP

Scott Parker
Principal
Deloitte Consulting LLP

Bruce Marcus
Managing Director | Deloitte Advisory
Deloitte & Touche LLP

George Hanley
Managing Director | Deloitte Advisory
Deloitte & Touche LLP

Josh Uhl
Senior Manager | Deloitte Advisory
Deloitte & Touche LLP

Sean Cunniff
Specialist Leader
Deloitte Services LLP

Subramanian Raman
Senior Manager | Deloitte Advisory
Deloitte & Touche LLP

TJ Lyons
Manager| Deloitte Advisory
Deloitte & Touche LLP

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