04 May2018
INDUSTRY PERSPECTIVES FROM FRANK LaROSA; For Whom the Bell Tolls: Tracking the Demise of DOL Influence, How Firms Have Taken Advantage, and How Transition Will Change Once Again; This Time for the Better.


It’s becoming increasingly evident that the DOL is on life support. With outdated guidance, a lack of insight, and near zero influence seemingly ruling the day, it comes as no surprise that firms are re-evaluating their approach to DOL mandates.

At Elite Consulting Partners, we have spoken to quite a few firms that are making plans to bring back larger, back-end component deals which marks a decided shift in thinking. Up until now, many firms have been reluctant to maintain lucrative back-end deals that are paid on retirement accounts. With the bite of DOL going away, we are beginning to see firms throwing previous caution to the wind and talking about reinstating such back-end deals based on the advisor’s entire book of business, including retirement accounts.

Additionally, to continue to manage some of that risk, we also hear chatter about firms paying a higher back-end bonus on advisory business versus transaction business. There is no doubt that these new firm practices and policies will add fuel to the fire when it comes to the already scorching recruitment market that exists today.

Another unique twist when it comes to the relationship between DOL rules and financial services firms is firm manipulation to use the DOL as a cover to reduce business development risk. The vague and inconsequential nature of DOL rules created a climate where firms looking to reduce their business development risk could decrease the number of funds and VAs offered, which shoots direct fund business right onto the firm’s platform/grid, and results in reducing advisor recruiting costs and expenses. With firms figuring out the loopholes which make these lower business development costs possible, what happens to the DOL has become a non-event for many.

An even bigger issue is not whether the DOL survives or suffers a slow demise, but whether the ghost of its rules and regulations will continue to haunt the financial services industry. In the wealth management and broker dealer space, DOL policies of moving toward advice-driven and fee-based business, narrowing investment choices and funds, and creating more client-friendly pricing on variable annuities is here to stay and has created a long-term ripple effect of both decreased retirement asset revenue on recruiting deals and firms dropping out of protocol.

So, as taps plays softly in the background throughout the halls of the DOL, it leaves those of us in the industry the task of managing to the these and the myriad of other issues caused by the uneven DOL guidance as it exists today and strategizing for the impacts of the DOL Last Will and Testament in the future.

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