BISA Magazine - Quarter 3, 2016 - 36

EXIT STRATEGY The DOL's New Operating System David Macchia is chief executive at Wealth2K, a Boston-based provider of enterprise retirement income solutions. He also serves as senior consultant for retirement income at LIMRA, the Life Insurance Industry Marketing and Research Association. BISA Magazine talked with Macchia about the implications and impact of the Department of Labor's new fiduciary standard. There's a new operating system. It will cause disruption, but it is more tailwind than headwind. - David Macchia, Wealth2K „  On the broad implications of the rule: Clearly, it will suppress advisor compensation. But there is a lot of need, money and opportunity out there, and nothing in the DOL rule stops that. „ On the bright side: There are many underserved bank  clients, and many of them need guidance about securing a safe retirement. One positive aspect of the new DOL rule is that it will force firms to better serve constrained, or less wealthy, customers. „ On transition - and opportunity: It won't be easy. Most  investment professionals do not have expertise in income distribution planning. They have largely focused on accumulation of client assets. With DOL, everything gets turned inside out. Whereas advisors and their clients once zeroed in on return on investment, or ROI, now it's a different kind of ROI called "reliability of investment." Some advisors won't be able to make the conversion, but those who do could have an opportunity to really stand out now. „  On consistency: DOL makes process the most important thing. Today, we commonly have outcomes whereby in the same firm, in the same town, clients of the same age, with like risk tolerances and similar amounts of assets can come away from the planning process with very different solutions for generating retirement income. This can't happen anymore. The variability of client outcomes has to end in order to minimize firms' financial liability potential. 36 www.bisanet.org „  On changes to the design of plans: Costs will come down. There will be more focus on income, not accumulation - returning to what insurance really should be. It will be tougher for product providers to stand apart from each other. Those insurers with the highest financial strength ratings will probably own a competitive advantage. „ On digital advice (robo advisors): In time, robo will be just another channel for serving customers. Millennials are already using their cell phones for investment transactions. There will be increasing pressure on banks to offer something similar for millennials and other customers. Robos may be a little dangerous - it's another move toward commoditization, and it may be hard to make a profit doing it. „  On the biggest misconceptions about the DOL rule: Many believe that it is destroying the business they know and love. I don't see it that way. It's also a path for growth. DOL gave an enormous but unintended gift to the business of income distribution planning. Bank investment consultants should benefit enormously. Why? Because when executed properly, in virtually every case income distribution planning leads to a consolidation of household investment assets. „ On the bottom line: "There's a new operating system. It will cause disruption, but it is more tailwind than headwind." - As told to Andrew Singer http://www.bisanet.org

Table of Contents for the Digital Edition of BISA Magazine - Quarter 3, 2016

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BISA Magazine - Quarter 3, 2016 - Table of Contents
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BISA Magazine - Quarter 3, 2016 - Cover3
BISA Magazine - Quarter 3, 2016 - Cover4
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