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The DOL Ruling: 3 Implications for the Advisor-Client Relationship

shutterstock_70550545The Department of Labor (DOL) has finally redefined who will be held to the “fiduciary standard” concerning retirement investing advice and how it’s applied. Yesterday’s long-awaited ruling—which requires registered investment advisors, brokers, and insurance agents (collectively “advisors”) to act in the best interest of their clients—has huge implications that will affect the advisor-client relationship for years to come. Here are three of them:

1. Advisors must learn all there is to know about their clients in order to better serve them

With the new ruling, it will become increasingly critical for advisors to discover all there is to know about their clients and put their clients’ need and wants front and center. Doing so will allow them to give better investment advice while upholding their fiduciary duty. This includes using “next-generation tools” such as social networks and digital aids to cultivate relationships and facilitate ongoing communication through the sharing of tailored content and thought leadership.
Additionally, advisors must provide differentiated value at low cost to better serve their clients in light of greater transparency into how they are being paid in fees and product commission. The greater value advisors provide, the better prepared they’ll be to recommend investments that are in their clients’ best interest.

2. Advisors must embrace technology in order to deepen relationships and increase productivity

Technology will play a big role in how advisors reach and engage with clients as well as boosting their day-to-day productivity. Hearsay Social CEO and founder Clara Shih has spoken about this many times before, including at a 2015 BlackRock leadership event focused on the future of wealth management. She discussed the need for advisors to deliver more value to clients amidst greater productivity pressures by stating:

“Advisors can only do this by embracing technologies that free their time to focus on the human, emotional aspects of helping coach clients through tough life decisions. Two of the most time-consuming aspects are asset allocation and business development. Overall, the consensus from the C-suite is that there are big opportunities for advisors to leverage automation and productivity tools to help them recapture some of that time.”

3. Firms must leverage technology that enable advisors to better attract, engage, and keep high-net-worth clients

To compete under the new rules, advisors will need to cast a wider net in order to attract and keep high-net-worth individuals (HNWIs). Millennials, in particular, which represent a growing group of HNWIs under the age of 40, offer significant opportunities for advisors. According to the 2015 World Wealth Report, these younger investors prefer to use mobile phones, tablets, and other mobile devices for nearly all their information, transactions, and interactions. By leveraging technology, firms can enable their advisors to attract and keep this sought-after segment.
There is no question that the new DOL rule will have a big impact on advisors who are currently managing 401(k) plans and advising on individual retirement accounts. As we dig deeper into the new ruling, we will continue to keep our customers abreast of how these changes will unfold.
One thing is certain: It’s more important than ever for advisors to leverage technology to learn all they can about their clients and share thoughtful recommendations across their clients’ and prospective clients’ preferred communication channels–both online and offline.
Above all else, the DOL ruling serves as a loud wake-up call for advisory firms to adjust their business models to meet the new fiduciary standard, and the extended grace period will allow firms ample time to do so.  
Be sure to follow @HearsaySocial for ongoing dialogue and insights around the DOL ruling.
For more information, check out the following news resources:

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Change, cooperation, and the transforming customer experience: Notes from the 2014 LIMRA Europe Annual Meeting

LIMRAStrategicPartnerLast week’s LIMRA 2014 European Annual Meeting was my first insurance conference,  so I didn’t quite know what to expect. As it turns out, when you bring together a diverse group of people from Europe, Asia and Africa–and add a bit of Paris magic–you come out with some impressive results.
In this recap, I’ll cover key takeaways from LIMRA’s meeting including:

  • Demographics is a key driver of change.
  • Make customer experience essential to your organization.
  • Gamification is important for engaging consumers.
  • Bancassurance is here to stay and increasingly relevant in newer economies.
  • Digitization will change how we interact with our consumers.
  • Cooperation is key to organizational success.


Day 1: Improving the customer experience

Robert A. Kerzner, President and CEO of LIMRA, kicked off the event, setting the stage for changes happening in the insurance industry. Because demographics is by far the biggest driver of change, he argued, firms should give more focus to retirement as opposed to life insurance. He also believes that the world of insurance agents and commissions is changing, especially in developing economies.
Mr.  Kerzner spent a greater part of this presentation discussing companies from other industries (e.g. Coca-Cola, Walmart, Disney, Virgin) and how the insurance industry can learn from their own efforts to improve the customer experience.
Other presenters from the first day hailed from diverse walks of life, providing more intellectual and innovative ideas to delegates in attendance.
For example, Dr. Barbara Fasolo, Associate Professor in Behavioural Science in the Department of Management of the London School of Economics, spoke about her interest in “choice architecture,” and how to present information visually so users can make smart choices. Both Barbara and Robert brought up gamification as a smart way to increase consumer engagement.
Boston Consulting Group partner and TED speaker Yves Morieux spoke about the need for cooperation within teams, which he believes to be critical for companies to excel. He showed a video of the women’s relay team of France winning in 2003 and argued that they won–not because they had the world’s best runners (USA did)–but because they were better at cooperating with each other before, during, and after the race.

Yves Morieux sharing the simple rules of cooperation in business.

Later on, Hearsay Social’s Olivier Maire (@olivier_maire) presented to a packed room of delegates on the power of social business.  There were many questions on how to open up the social networks in a way that does not increase reputational risk.
We ended Day 1 with a fabulous evening at Pavillon Dauphine, punctuated with live music, quizzes, and a stand-up comedian act by Shappi who was absolutely hilarious!
On the second day we were treated to a magnificent view of the Eiffel Tower from our conference room for the duration of the conference. This provided a unique backdrop for the sessions presented by the CEO of Aviva France, CMO of Saxo Bank and others.

Day 2: Increasing digitization

The second day of LIMRA’s meeting was dedicated to practical advice on various topics ranging from social media to business models to affinity insurance. Nicolas Schimel, CEO of Aviva, gave a particularly enlightening speech around his views on where the insurance market is going and what Aviva is doing to adapt. He believes that the three biggest drivers of change for the insurance market are:

  • Increasing digitization for communication and consumer interaction
  • Bancassurance growing in newer economies
  • Redistribution of the tied vs independent agent mix

Based on a study by Rolan Berger Strategy Consultants, the largest type of buyer by channel of access is going to be more a “hybrid buyer,” or one who is going to use both face-to-face and digital methods throughout the purchase journey.
All in all, the 2014 LIMRA European Annual Meeting was the perfect introduction to insurance conferences for me–it was fun and insightful!