While the new rule doesn’t ban commissions, advisors who sell commission-based products or investments for retirement accounts will need to provide clients with a new disclosure agreement, called a Best Interest Contract Exemption (“BICE”).

The BICE pledges that the advisor will act in the client’s best interest and only earn “reasonable” compensation – this is not the lowest possible compensation, however it is based on the going market rates and may not  be excessive.

All compensation for these commission-based products and investments must be clearly spelled out in the BICE, which must be signed by clients when they open an account. A BICE may also be required to document why a rollover from a 401(k) plan to an IRA under a level-fee arrangement is in the client’s best interest if the fees for managing the new IRA will be greater than the existing plan’s fees.

The new DOL rule does include a grandfathering clause covering investments that were made prior to the “applicability date” of the contract. Investments and advice made after this date will be subject to BICE provision. Under the rule, there are currently minimal disclosure requirements for existing clients with existing products. Typically, they can agree by negative consent with no signature required.

Advisors may want to review each client account and determine whether their needs can still be met under the existing account structure, or whether a change would be in the client’s best interest. If you are dually registered and you have clients in commission-based accounts, you should consider whether it makes sense to transition them into level-fee accounts.

In addition, consider your smaller accounts. Will the requirements of the new rule make them unprofitable? You might be able to address smaller accounts by using a model-based platform where you can make trades and rebalance portfolios at the model level, not at the account level. Or, you could consider a different investment model, such as adding digital portfolio management strategies.

You should consider documenting the actual total charges paid by your clients — all compensation paid to advisors for activity related to every client — and not just rely on your fee schedules. This calculation may require aggregating across multiple accounts. Then you can compare these numbers to industry standards to document that your charges are reasonable. As you review your firm’s compensation policies, you may want to avoid variable compensation, progressive compensation and any links between compensation and production. You should also consider instituting a firm-wide policy prohibiting any contests or rewards based on production.

For retirement accounts, you may want to reconsider any investments or products that now carry a higher level of risk because of their compensation structures. Are you using the appropriate product tools you need to build “best-interest” retirement portfolios for your clients?

The fiduciary rule requires you to determine, demonstrate and document your advice when working with clients on their retirement accounts. You may want to review your workflows to ensure they adequately archive client interactions, conversations and transactions.

When it comes to retirement portfolio construction, you’ll want to make sure your proposals and Investment Policy Statements detail the thought process behind your recommendations and how every investment is part of a long-term plan designed to help clients pursue their financial objectives.

Having the right technology in place can play an important role in ensuring your fiduciary responsibility. The right technology platform can help match appropriate investment strategies to clients, document the rationale behind such recommendations and accurately profile and document a client’s risk assessment. The right technology can also help ensure that accounts of all sizes receive a consistent investment process, and provide clients with a high level of transparency to review all account and performance documents and any associated fees.

Clients and prospects are likely confused by all the media coverage surrounding the fiduciary rule. They may be wondering how your firm adheres to the best-interest standard and whether recent new rulings will impact their accounts. Consider taking this opportunity to address the new rule and what it means to be a fiduciary. A smart marketing approach can help reinforce the value you bring to the relationship.