Leading Through The Regulatory Wilderness: Find Your True North

Dr. Betty Moon

Some of my fondest childhood memories are from my years participating in the Girl Scouts. In scouting I learned about leadership and teamwork and developed terrific sales skills through selling Thin Mints to friends and neighbors. If you were active in scouting, you may have also enjoyed camping and hiking in the woods and the requisite scout survival training courses. During these courses we learned what to do if darkness set in and our way home was unclear. One of the most important things I learned during these survival courses was the difference between true north and magnetic north. Magnetic north is the mystifyingly shifting and deceiving point that too often can misdirect you from safely reaching your destination.

Today’s financial services regulatory environment is very much like a deep dark wilderness. The Department of Labor’s fiduciary rule, currently expected to go into effect in April 2017, may be postponed, altered, or eliminated. It is magnetic north. By setting out to follow it, with its revisions and changing political winds, it is not surprising many executives are feeling frustrated and lost. So what is the right next step?

Some of scouting’s survival lessons, easily remembered by children with the acronym STOP, may very well serve to help us find our way through this wilderness too. 

S is for Stop

Take a deep breath and consider what happened to get us here. Our industry’s overarching problem is not the Department of Labor’s ruling. While the vast majority of investment firms and advisors have always operated in their customers’ best interests, there have been bad operators who exploited clients for personal gain. The past cannot be undone and the industry is now in a survival situation. Whether the new administration on Capitol Hill delays implementation or completely dismantles the new rule, the fact remains that we must deliberately and carefully forge a new path—a path that instills consumer confidence while ensuring that quality retirement and investment advice is available to large and small investors.

T is for Think

It will require clear heads from industry leaders to successfully move forward. Your most important assets are your knowledge and the collective knowledge of your team and our broader industry. Your next move must be made quite deliberately. The intense publicity surrounding the DOL rule has increased consumer awareness of retirement advisor conflicts of interest, while consumers continue to view financial services as the industry they trust least.*

It seems inevitable that politicians and consumers alike will continue to push for increased transparency and accountability from all distributors and manufacturers of retirement products. New competitors are rapidly entering the retirement, investment, and insurance space. Expecting to turn around and go back the way you came is unrealistic because that path has disappeared. Now is the time to identify exactly what will distinguish your firm in the minds of your current, and future, customers.

O is for Observe

Assess your current situation and options. Without question, the terrain is shifting, and your resources may not be as robust as you would like. Take stock of your current processes, technology, personal capabilities, and the abilities of your team. Then evaluate the competition and how they are faring. You may have more resources at your disposal than you think. It may not be necessary to completely revamp your entire enterprise infrastructure. Instead, you may be able to take advantage of new, more efficient software and tools to provide you with distinct competitive advantages. If another change in the regulatory winds tempts you to return to the “business as usual” path, be aware that as new competitors enter the marketplace and move forward, you may be left far behind.

P is for Plan

Prioritize your immediate needs and develop a plan to deal with the immediate crisis while also preparing for the future. Simple integrated technology solutions are available to help you ensure your customers’ best interests are protected, that your employees are well trained and managed, and that you can deliver real time reporting and analytics as needed. Working with a trusted and respected technology partner can be a valuable asset as you evaluate the right solutions to serve your needs. 

True north

We cannot predict what the next regulation will be or when it will emerge. The truth is, whether the DOL Fiduciary rule is enacted or not, American consumers have had real grievances about the financial services industry. We must not fail to recognize the long-term impacts of that criticism.

Today’s regulations are not your compass. Following an ever-changing magnetic north will shift you out of alignment with your customers, employees, board of directors, and regulators. Identify your true north: your firm’s guiding principles, and hold them up to light the path for every member of your organization. Then focus on acquiring the right tools and partners to help you along the way. You’ll make adjustments as you go, but you’ll be on solid footing the entire journey.

Source: https://www.scribd.com/doc/295815519/2016-Edelman-Trust-Barometer-Executive-Summary

Interested in learning more? Download this article on how SAP can simplify compliance with the Department of Labor Fiduciary Rule.


Dr. Betty Moon

About Dr. Betty Moon

Dr. Betty Moon is Senior Principal and Financial Services Industry Expert for SAP. She develops business intelligence and thought leadership for the banking, capital markets, and life insurance industries, helping executives embrace new ways to envision the future of financial services. Her aptitude for rigorous research developed when she earned Doctorate and Master of Science degrees at Case Western Reserve University, and augmented during her tenure as Head of Bank Research for LIMRA International, a trusted global resource for insurance and banking industry information. Dr. Moon holds the CFP designation and held securities and insurance licenses, including FINRA Series 7 and Series 24, for 30 years.