Labor Secretary Alexander Acosta announced in a recent Wall Street Journal op-ed (and official memo) that the DOL Fiduciary Rule will in fact go into effect on June 9 as scheduled (after the recent 60 day delay from April 10). We see this as excellent news for the industry, advisors, and investors, as it signals the DOL’s intent to move forward with the rule.

Acosta’s caveat that more public input will be sought prior to the January 1, 2018 full implementation leads us to believe that there could be alterations to the shape of the rule or guidelines for implementation. Regardless of potential modifications along the way, we believe the spirit of the rule has already accelerated a bigger long-term trend in our industry — the move from a product-centric to a client-centric way of doing business.

Defining “The Client-Centric Advisor”

Beyond just avoiding conflicts, the spirit of the rule encourages advisors to put their clients’ best interests ahead of all other factors when providing investment advice on retirement accounts. Those who embrace this philosophy can use it as a catalyst to transform their firms and differentiate themselves from their peers.

The Client-Centric Advisor incorporates the following elements into their advice to each and every investor, large and small:

1. Personalized: Crafting portfolios specific to each client, truly reflecting their unique profile.

Some advisors can only afford to personalize a portfolio for their largest clients, while everyone else gets somewhat mass-produced solutions. However, with the right planning and operational and technical infrastructure in place, creating customized portfolios for each client can be done at scale.

2. Goals-based: Helping clients achieve their life goals, instead of simply chasing performance.

The traditional approach to designing and measuring portfolios against a benchmark is changing. With many industry leaders embracing goals-based wealth management, portfolios are increasingly being designed and measured around each investors’ unique goals for their wealth.

3. Holistic: Managing an entire household’s wealth as an interconnected whole.

Many advisors are used to managing a client’s wealth account by account. Even if an advisor wants to take a holistic approach to providing advice across a household’s entire wealth, often the best they can do is household level reporting.

But ideally they should go beyond just reporting and develop a comprehensive household investment strategy informed by the entirety of a client’s assets, either through direct management or data aggregation tools for awareness of all held-away assets.

4. Tax-aware: Optimizing portfolios to capture tax alpha.

Rather than trying to pursue alpha through traditional benchmark-oriented investing, The Client-Centric Advisor can demonstrate a more predictable source of alpha to their clients by making the most of tax management.

This starts with considering the unique tax profile of each client account and includes the regular, ongoing application of sophisticated tax management practices such as tax lot selection, proactive tax loss harvesting, short-term gain deferral, and asset location.

It is only through the holistic, household portfolios mentioned above that you can achieve asset location, the optimal placement of securities in taxable vs. tax-advantaged accounts based on each security’s tax efficiency.

5. Digitally enabled: Offering interactive tools to let clients interact with their wealth the way they want to.

The rise of digital wealth services has democratized wealth management, challenging the value proposition of traditional advisors. Investors have new expectations in today’s digital world; they want a hybrid of the human touch with easy digital access, combining the efficiency of a digital platform with the personal touch of real advisors.

We live in an anytime, anywhere world and The Client-Centric Advisor interacts where and when their clients want to.

So while the ultimate fate of the DOL Rule may still hang in the balance, we believe the spirit of the rule will remain — the paradigm shift from a product-centric to a client-centric way of doing business.