The US Department of Labor recently issued the final draft of a new “Fiduciary Rule”, scheduled to go into effect in April, 2017. Fundamentally what this rule does is reclassify the duty that certain financial and investment advisors have towards their customers. Previously many people who provided investment advice, such as insurance agents selling retirement products, were held to an “applicability” standard. Other investment advisors registered with the Securities and Exchange Commission or individual states were held to a higher “fiduciary” standard. This new rule moves all investment professionals to the fiduciary standard, which requires investment advice be in the best interest of the customer, completely disregarding the interest of the person offering this advice.
This new standard brings challenges to the life insurance and annuities space. Apart from new regulations and duties, the fiduciary standard applies not only to what investment advisors say, but what information they provide in written or digital form. This excerpt is from the Department of Labor factsheet on the new rule. Any recommendation from a fiduciary must meet these new standards.
“A ‘recommendation’ is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action. The more individually tailored the communication is to a specific advice recipient or recipients, the more likely the communication will be viewed as a recommendation.”
Viewed in the light of this definition, Customer Communications Management (CCM) becomes a critical component of managing this new rule. Many insurance agents and other investment advisors use legacy systems to generate customer communications. These legacy systems allow communications to be personalized, but at a high cost of maintenance. This personalization is a huge advantage to the advisor, but it is now critical to review each of these personalized communications to confirm that it conforms to the new legal reality. CCM becomes even more critical as we consider the need to centrally manage this content. Scattered, decentralized communications organization will make it far more likely that an advisor will send incompliant content to a customer, exposing the company and the advisor to considerable risk.
If you are using a legacy CCM system to manage investment-related communications, it is critical that you begin an inventory now to make sure you are compliant with the fiduciary rule. If your current system does not have centralized template control, shared legal language, and controlled editing to prevent inadvertent violations, it may be time to consider upgrading.
