The rules of the game have changed for wirehouse advisors.

Advisors at the largest brokerages need to accept reality that they have to reposition their businesses so they and their clients can thrive in the new fiduciary era.

Once the rule takes full effect in January of 2018, any commission business done in retirement accounts must be done in accordance with a Best Interest Contract Exemption, or BICE. That is, advisors must certify that the trades are in a client's best interest. Variable annuities, REITS, and proprietary products can be offered under the same guidelines.

While many advisors were relieved that the new rules leave the door open for commission business, in my view the long-term trend is clear: Commission business will become far more difficult to do in retirement accounts.

LEGAL LIABILITY

Even if a buy-and-hold approach or opportunistic trades are in a client's best interests, each time an advisor does anything other than fee-based business, the advisor and their firm may end up in the legal crosshairs of a plaintiff's attorneys. A BICE will not automatically insulate a firm from lawsuits. It seems likely that some BICEs will be challenged by attorneys who will find them tempting targets. Some firms may decide not to use this loophole altogether.

Now that the BICE structure has been set up, regulators will be looking to tighten the noose over time by narrowing the kinds of non-fee business that can be done in retirement accounts. Moreover, if firms operating under a BICE lose customer lawsuits, they'll likely shrink the kinds of products and services that their advisors can offer in retirement accounts. Firms won't even wait for regulators to issue new fiats.

The new fiduciary rules are merely the opening shot in a longer war. It's a struggle, that in my view, regulators are destined to win. Ultimately it will not be feasible for advisors to service retirement and non-retirement accounts under two distinct sets of standards. Once the new regimen has been demonstrated to be working well for investors in retirement accounts, it will likely be extended to cover all investment accounts.

Moreover, fiduciary advocates have done an effective job of casting the new rule as a huge win for consumers. The groundswell of media approval that they've created will be impossible to stop. As advocates tell it, clients will benefit from lower investment management fees, as well as the fact that their advisors will be clearly charged with safeguarding their interests.

TIME TO REPOSITION

The fact is many commission-based clients may now be forced to pay more for fee-based programs that they may not want. Meanwhile, some advisors may start to shun smaller accounts they deem to have too much risk and not enough reward. Those small clients may end up getting get lost in the shuffle.

Advisors need to accept the fact that Wall Street will ultimately be governed by a full fiduciary standard and that it's up to them to figure out how to position themselves so that they and their clients can thrive in this new era.

Organizations that represent advisors can work with regulators to ensure that the rules are crafted in the least detrimental way possible. But that won't alter the new fiduciary reality that advisors need to confront.

But isn't that unfair you might ask?

Why should advisors and clients who prefer commission business have their options limited? Why should transactional advisors be arbitrarily viewed by regulators as hucksters while their fee-based counterparts are adulated as saints?

Remember, your mother never said that life would always be fair! It's up to advisors to figure out how they and their clients can thrive even when the rules of the game have changed.

As a young recruiter talking to Shearson Lehman brokers back in the 1980's, I recall they had desktop machines called Quotrons for looking up stock market quotes. In those days, clients who wanted real time stock prices had to call their broker to get them.

These Shearson brokers explained to me that they picked which stocks to buy and sell by observing market trends. If the market was rising and they saw a stock or stocks in an industry gaining in price, they'd jump on it and buy. "The trend is your friend" was an oft repeated adage from those days.

So how can advisors thrive in the fiduciary era?

1. Swim Upstream

Advisors need to focus on relationships that are worth the additional documentation of your investment process required under the new rules.

2. Do More Fee-Based Business

Why not? Why fight it? The new regulations offer the perfect rationale to move commission based clients into a fee-based relationship.

3. Limit Your Investment Menu

Make sure that you are offering clients only those products that you know inside and out. You'll need to be convinced that they are right for clients as well.

4. Drive Defensively

Move smaller accounts to fee-based offerings that firms will be introducing for smaller retirement accounts or to robo advisors if your firm has that option. Smaller transactional accounts are hazardous to your career.

5.  Market Your New-Found Fiduciary Status

Promoting your compliance with the fiduciary rule may help you attract more business. The industry knows well that clients are more confident working with advisors who've been recognized as fiduciaries.

So if you're still fighting it, the time is now to learn how you can put this new rule to work for your practice and help your clients.