The final version of the fiduciary rules recently introduced by the Department of Labor will be a game-changer for many financial advisors. It will also change things for many of their clients, especially those working with an advisor who is compensated all or in part via commissions.

While some advisors may find these new rules cumbersome and may dwell on the increased compliance costs, others will hopefully use this change in the rules to educate clients on the value of the advice they provide. Here's some advice on how to do that. (For related reading, see: What the DoL's Fiduciary Policy Means for Advisors.)

Advisors Who Know the Ropes

Financial advisors who are fee-only probably have a leg up on using the new rules as an opportunity to educate (or reeducate) their clients. And advisors who are members of professional organizations like NAPFA and The Garrett Planning Network have embraced their duty as fiduciaries for many years; NAPFA members actually sign a fiduciary oath and reaffirm that oath on an annual basis. The new rules around retirement plan advice provide an opportunity for these advisors to reinforce that they have always put the interests of their clients first, not only with regard to retirement accounts, but as the cornerstone of their entire relationship with their clients.

Registered investment advisors (RIAs) who are registered with the SEC (and many states) are also held to fiduciary standard as well. They are required to place the interests of their clients above their own, among other rules. These advisors should use this opportunity to educate their clients regarding the methodology they use to make recommendations for the investment and financial planning advice they give. Advisors should show that the financial products they suggest benefit clients and that they don’t earn any fees by recommending them. (For more, see: How Advisors Can Plan for Fiduciary Rule Changes.)

Be Proactive With Clients

All financial advisors, whether they're fee-only or in the brokerage world, would be wise to get out in front of these changes and communicate what these new rules will mean to clients. If your firm will be changing the way in which you will be doing business in the future, let your clients know. Tell them why you are doing this and how it will benefit them.

For example, broker-dealer LPL Financial lowered its fees on most of its asset-based accounts prior to the finalization of the fiduciary rules. If you or your firm are doing something along these lines, tell your clients. If you will be proposing to move clients from a relationship where they were paying commissions for occasional transactions to where they will now be paying an ongoing fee, it is important that you communicate to them why this move is beneficial to them.

John Anderson of SEI Investments Advisor Network recently told Think Advisor that advisors should take a proactive approach to educating clients about the new rules — something along the lines of: “I get to set the conversation well in advance and say ‘you’re going to hear something that’s called the DoL fiduciary rule. Let me tell you a little bit what that looks like. Let me tell you how that’s going to change the relationship that we have. Not better, not worse — just it’s going to change it.’”

This is a major change in the financial advisory industry and it represents a good opportunity to be open to your clients about any changes ahead. (For more, see: Meeting Your Fiduciary Responsibility.)

Figure Out Your Value Proposition

This is a great time for financial advisors to state or restate their value proposition for clients. For fee-only advisors, it might be something along the lines of “… we’ve always placed your interests first from day one. We will continue to do this. While brokers and brokerage firms struggle to reinvent themselves in this new era, we will continue to focus on planning for your future and implementing the strategies we have laid out for you.”

For brokers and advisors working on a fee and commission basis, their statement might include emphasizing the additional options that you can bring to clients as a fiduciary. If it’s true, this is the time to remind them of all the good you have done for them. Your clients may be confused both by what they might be reading about the new rules and the communications they may be receiving from your firm. This is the time to be their trusted advisor and allay their fears and concerns.

The Bottom Line

Financial advisors will want to drive the conversation about the new fiduciary rules and their impact with clients. This is the time to be proactive and to use this an opportunity to educate your clients about the new rules and how your relationship with them will or will not be impacted going forward. (For related reading, see: The Fiduciary Rule's Impact: How It's Already Being Felt.)