Digital Signatures Help Broker-Dealers Navigate DOL’s New Fiduciary Rule

The clock is ticking.

April 10, 2017 is “D-Day” for broker-dealers and other financial services professionals handling retirement accounts. It’s the date when the Department of Labor’s (DOL) new rule to address conflicts of interest in retirement advice—commonly known as the DOL’s “fiduciary rule”—first takes effect.

Here’s the short version:

The DOL expanded the types of retirement investment advice covered by fiduciary protections. Under this new rule, any person providing investment advice for a fee must act in the client’s best interest, not his own. That is, the advisor’s focus must be on getting the best investment for the money instead of earning commissions.

One of the major changes with the new rule is that broker-dealers, who were not previously classified as fiduciaries under the Securities and Exchange Commission (SEC), will now be deemed as such.

Where goes regulatory change, so goes technology

Most broker-dealers are already acting with clients’ best interests in mind, yet this new rule could mean exploring an entirely new business model – as well as an overhaul of their back-office management on retirement accounts. From a day-to-day perspective, the DOL’s fiduciary rule could have a huge impact for these financial professionals.

Broker-dealers will need to execute best-interest contracts in many cases, formally document any possible conflicts of interests, update disclosure agreements and more. Then, some of these documents need to be signed by clients. The good news: Where there’s paper pain, technology is never far behind to ease the burden. 

Specifically, digital documentation and electronic signatures are among the best ways for broker-dealers to navigate the fiduciary transition. All of that documentation that has to be repapered—which could add up to hundreds of thousands of sheets of paper, if not more—can be automatically and digitally routed to clients for review and execution—saving time, storage space and a significant amount of money.

The right e-signatures for a complex industry

Not all electronic signatures are equipped to handle a regulatory change of this magnitude for broker-dealers.

As fiduciaries, broker-dealers are legally bound to act in the best interests of clients. So if there is any suspicion that isn’t the case, the lawsuit floodgates will open. 

For that reason, the integrity of broker-dealers’ new contracts and disclosures cannot be undervalued. These documents must be able to stand up to legal scrutiny, and the e-signatures that finalize the documents must be able to conclusively prove their own validity. 

Digital signatures, like our Independent E-Signatures™, are the only type of electronic signature that can promise the compliance, security and risk mitigation necessary for these important documents.

That’s because unlike basic e-signatures that rely on links and proprietary technology, digital signatures use public key infrastructure to permanently embed the cryptographic information of a signature into the PDF of the document. That means, you forever have independent access to the legal evidence that proves an e-signature is valid.

Even more, our Independent E-Signature™ technology can use the highest levels of identity authentication to prove the right person signed a document. It also provides a comprehensive audit trail so that every part of the signing process is tracked with detail and precision and there are no gaps that could be disputed in court. Tamper-evident technology, as is integral to Independent E-Signatures™, alerts users any time a change occurs to the document after a signature or an initial has been applied, which further supports document integrity.

No time to waste

Only months remain before broker-dealers’ “D-Day.” Burying their head in the sand isn’t an option for firms looking to efficiently and effectively comply with the DOL’s new fiduciary rule. Those that prepare now by leveraging legally sound technology will not only survive but thrive amid one of the largest financial industry changes of our time.

The DOL’s fiduciary rule isn’t the only reason to use e-signatures in the financial services industry. Discover five more reasons financial advisors love e-signatures in this free ebook.