Wednesday, May 11, 2016

DOL Conflict of Interest Rule Web Site Issue

Wow! Wow! Wow! Government regulation has hit guys like me with a sledgehammer. This new DOL Conflict of Interest Final Rule has caused me to modify my firm's documents and add a ton of new ones. For example, if I advise someone on their 401k, then I have an agreement for that. If I advise someone who only wants a Goals Based Financial Plan, then I have an agreement for that. If I advise someone who needs their portfolio managed, then I have an agreement for that. These are only for Florida clients. If they live in another state, then I have multiple agreements for those other states.

However, that is only the easy part. The hard part is when you are moving money from a 401k to an IRA, or an IRA to an IRA, or a Roth 401k to a Roth IRA, or an IRA annuity to an IRA. I could go on and on with these examples, because there are close to two dozen different scenarios that I can think of where I will now have to present clients with another form. This new form needs to explain all of the distribution options to a client. For example, if you are moving money from a 401k to an IRA, then that is considered a distribution. Further, you have to tell clients if they can leave their money where it is, too. In addition, you have to spell out all of the fees for the client's current account and compare that to a proposed account that I may be offering.

In addition, to creating all of these forms, then I have to put them up on my web site. Now this one factor in the rule is very interesting. I do not think the gravity of this situation has hit home yet with financial industry trade publications. I have seen no news on this issue. Think about this fact. If everyone, myself included has to put up their master agreements on their web site, then doesn't that mean that "lazy" financial advisors will try and copy them for their own use? In my mind, it certainly means that all lot of copying will be going on. I don't know if I like that fact that I can spend countless hours creating and revising my documents and find that some "yea who" has stolen them right off of my web site. It is true that I can restrict the documents from being printed or copied, but if someone really wanted to copy it, they could sit down and re-type my documents word for word. I do not have a real good feeling about this web site issue. I can tell you that straight up. If financial advisors will steal your money, then they certainly would not have a problem stealing my documents.

In addition, to putting up my master agreements, I have to also put on my web site my specific policies and procedures as it pertains to this DOL Conflict of Interest Rule. Right now, my policies and procedures document is 130 plus pages, because it includes a sample of each form and agreement, plus our standard disclosure documents for our firm and our investment adviser representatives. This new DOL Conflict of Interest Rule says that I have to do this like it or not. Prospective clients might flip through it on the web, but there is a loophole. As long as I put it on the web site to be viewed, then I am compliant with the rule. I cannot imagine a prospective client wanting to print off 130 plus pages of my policies and procedures. However, I am worried about "yea who" financial advisors trying to steal my stuff.

You can probably surmise that every financial advisor will have their own agreements on their web site. Think about that for a moment. As a prospective client, you will be able to see the policies and procedures, plus master agreements, and disclosure forms of any financial advisor in the country prior to entering into an arrangement with that financial advisor. I suppose this is a good thing for prospective clients in the know, but what about those who are not in the know?

So, with this new DOL rule, you can compare my forms against another financial advisor's forms. Hopefully, you will see the brilliance behind mine and realize that I know what I'm doing. Also, if you see my forms copied on another financial advisor's web site, then I would appreciate it if you let me know. I might want to sue them for copyright infringement.

After already spending countless hours creating these documents, I have to say that I am rather proud of what I have accomplished. In addition, the first thing that pops into my mind is to sell them as a service to other financial advisors. If the amount of time that I put into making these documents is any indication, then perhaps, I will offer them for sale to other financial advisors for a tidy fee. One thing for sure is there will be a legend on my documents that says:

Copyright May 9, 2016 by Richard Allison Johnson. All rights reserved.