By Wes Fang, Vice Chair of the Finance Practice

As the Vice Chair of the finance practice at Advantage Media Group|ForbesBooks and a veteran of the finance world, I’ve been in the middle of the conversation around how advisors can continue growing their practice in light of all the regulatory changes proposed by the DoL.  Specifially embracing fee-based business models and the move away from the commission-based transactional approach.

My advice. Do it and do it now or you may be left behind.

The advantages of the fee-based model are well documented including removing the pressure to be a salesperson, increasing recurring revenue and encouraging more time for client relationships.

And while advisors have been switching from commissions to fees for over two decades, the transition rate has accelerated as the Department of Labor’s fiduciary standard-of-care ruling has heightened the demand to serve clients with greater transparency and greater value.

The rule, whose phased implementation period began June 9, requires advisor firms to act in investors’ best interest, exercise care in recommendations, receive reasonable compensation and avoid misleading statements. Firms must also oversee these guidelines and provide evidence adhering to them.

If a firm is unwilling to make the transition in the near-future, conducting business in accounts such as IRAs on a commission basis increases the risk for the firm and exposes itself to the threat of class-action lawsuits from investors beginning January 2, 2018.

And nothing moves the practice of any business more than the threat of increased liability.   The DoL ruling has pushed advisers from the long tradition of charging clients based on transactions to creating a set fee.

ETF Trends reports on a study that says AUM managed by RIAS and fee-based advisors will increase more than 60% from $4.1 trillion in 2015 to $6.6 trillion in 2019, and RIA and fee-based adviser headcount will expand from 59,000 to 67,000.

Morgan Stanley Wealth Management, for example, had $18.8 billion in fee-based asset flows in the first quarter of 2017, a 219% increase over $5.9 billion for the same period in 2016, according to the firm’s recent earnings release.

Kevin O’Brien, Founder and President of Peak Financial Services, Inc., agrees that advisors should make the move sooner rather than later if for no other reason than to stay one step ahead of their clients. After all, the ruling was presented by Secretary of Labor Thomas Perez as a law that would make firm “put their clients’ interests first.”

O’Brien says that “clients will begin to get educated about the proposed DoL rules, and they will be more confident in knowing their advisor was already in, or moving in, that direction.”

Brian Fricke, CFP and author of “Worry Free Retirement” knew he had to make the transition as soon as he could for both personal and professional reasons.  From personal experience, my quality of life has improved immensely. I no longer feel like I’m on a never-ending hamster wheel of always having to look for the next sales opportunity. I spent an inordinate amount of my time looking for new clients and new sales opportunities rather than using that time looking after my established client base.  I owed it to them to make the change as quick as I could.”

The DoL ruling will encourage the country’s fiduciary firms to adjust their operations and practices.  It will fundamentally change the advising industry.  And nobody understands more than a financial advisor that being ahead of the curve is more profitable than being behind it.

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