Financial Meetings: Revisiting the Rules

This complex niche faces a shift in regulatory oversight -- again.
Here's what planners need to know.


Few realms in the meetings world are as complex and regulated as the financial/insurance sector. So, when a major governing regulation is tweaked, planners take notice. 

The latest wrinkle is the so-called fiduciary or conflict-of-interest rule, created to protect individual retirement investments and funds, which has some bearing on how incentives are structured. In a recent turn of events, this rule will no longer be enforced by the U.S. Department of Labor. Oversight is expected to fall -- eventually -- to another federal body: the Securities and Exchange Commission. 

Following is a closer look at this ever-morphing issue and the ways it affects how financial firms incentivize brokers and agents. 

In the beginning
The Department of Labor unveiled its intended fiduciary rule in April 2016. The measure went through several starts and stops, including when President Trump, just weeks into office, issued a memorandum to delay implementation while the DOL carried out further analysis. A transition period for implementation began in April 2017, and the measure finally took full effect on Jan. 1 of this year.

This federally mandated regulation states that financial advisers, consultants, brokers and agents (aka fiduciaries) who sell or offer advice on retirement products must be able to prove that they acted in their clients' best interest. This means they must disclose any fees or incentives they received for recommending particular products. 

This past March, however, the 5th Circuit Court of Appeals ruled that the DOL overstepped its authority by creating the measure. In response, the federal agency issued a scaled-back temporary enforcement policy in acknowledgment of the jurisdiction question. However, industry and legal experts familiar with the issue, including M&C contributor Jonathan T. Howe, president and senior and founding partner of law firm Howe & Hutton, expect the DOL to drop enforcement completely. 

That doesn't mean the fiduciary rule will go away: The SEC is now considering issuing its own regulation, which could apply more broadly to all individuals' banking and investment accounts, not just retirement accounts that were covered in the DOL measure. 

"I don't think the industry is off the hook," says Steve Bova, executive director of Financial & Insurance Conference Professionals. "There have been whispers for a long time that this belongs to the SEC and not the DOL. We imagine the SEC will instill similar regulations over the financial/insurance industry, same as the federal government has done over the pharma industry."

Prepped and ready
Though ownership and enforcement of the rule might still be in contention, industry insiders say that most financial institutes already have made the necessary changes, including those that affect incentive programs. 

When M&C first visited this issue ("New Rule for Financial/Insurance Meetings," July 2017), industry insiders detailed the changes they were making to incentive programs to comply with the regulation. Among them: 

• New qualification metrics, which base rewards on customer satisfaction rather than sales;
• The addition of education to incentive meetings, and
• A switch from rewards programs to recognition programs, along with new ways to qualify winners, such as rewarding financial advisers whose clients' accounts grew the most during a period, rather than those who sold the most financial products. 

"A lot of what was in the DOL rule should probably have fallen under self-governance 10 years ago."
Isabel Mahon, Director of Sales, Fairmont Hotels & Resorts
Isabel Mahon, Director of Sales, Fairmont Hotels & Resorts

According to Tom Wilson, division vice president at Maritz Travel, "the financial clients with whom we work took the necessary steps to comply and made modifications to their programs in terms of qualification and eligibility several years ago in anticipation of the DOL rule implementation."

Further, Wilson notes, "We have not seen any recent changes to programs as a result of the decision on the DOL rule, nor have we seen any changes 
in light of a potential SEC rule."

"A lot of what was in the DOL rule should probably have fallen under self-governance 10 years ago," says Isabel Mahon, director of sales, Fairmont Hotels & Resorts. "And since many of the companies were already in the process of making adjustments to the way they do business, they are keeping those changes in place."

Mahon notes that although some financial business dropped off when the fiduciary rule initially was introduced, "leads for financial incentive programs have been increasing over the past nine to 12 months, and it's not slowing down."

"We advise our members to get themselves into meetings and learn how these changes and regulations can affect their programs."
Steve Bova, executive director of Financial & Insurance Conference Professionals
Steve Bova, executive director of Financial & Insurance Conference Professionals

Information gaps
While financial firms' legal and compliance departments routinely keep current with industry regulations, a study released in early 2018 by the Incentive Research Foundation found that two-thirds of incentive-program owners (typically sales and marketing executives) weren't sure how their reward and recognition activities would be impacted by the new regulatory environment, just that they would be impacted.

While most of the 419 respondents were confident their companies had identified and addressed any relevant regulations, about one quarter of those polled, employees of financial-services firms, expressed less of a direct understanding of the requirements and the consequences of noncompliance than respondents from other industries.

"This is why we advise our members to get themselves into meetings and learn how these changes and regulations can affect their programs, and let bosses know how much business contracts as a result and how it can affect attrition," says FICP's Steve Bova. "They should be part of all important business discussions concerning the company."

The fiduciary rule, no matter which department oversees it, is a positive development for the industry, Bova says. "No one wants a bad financial planner," he reasons. "We want them to win trips and be successful, but we don't want them recommending products just so they can benefit from the advice."