On DOL Fiduciary

DOL fiduciary rule compliance a worry for fee-only financial planners

Additional hoops to jump through to show regulators they are fiduciaries have fee-only advisers fretting

May 22, 2016 @ 6:00 am

By Liz Skinner

Fee-only advisers already follow the spirit of the Labor Department's new best-interest rule on retirement advice, but they are worried about additional compliance hoops they'll need to jump through to show regulators they are fiduciaries.

A couple of hundred fee-only financial planners packed a meeting room at the National Association of Personal Financial Advisors spring conference in Phoenix last Wednesday to get an update on the DOL's conflict-of-interest rule, which was finalized in April.

By the end of the session, most advisers looked concerned, or at least confused.


“Because of the rule, more advisers are going to come under [the Employee Retirement Income Security Act], and under its exemptions,” said Richard Sirus, an attorney and shareholder at Greenberg Traurig. “It's very different from the Finra and SEC rules of today.”

The DOL regulation requires advisers act in the best interest of clients when discussing retirement assets such as 401(k)s or individual retirement accounts. It mandates that clients sign a best interest contract exemption if advisers are going to be compensated with commissions on certain products and in other situations. The DOL also outlined a less stringent exemption for level-fee advisers — such as when they roll a client's 401(k) into an IRA under their purview — that many call “BICE lite.” It's a provision that NAPFA specifically asked the agency to create, Mr. Sirus said.

(More: The DOL fiduciary rule covered from every angle)

Advisers who charge fees based on a fixed percentage of assets or a set annual fee will need to have clients sign a BICE lite noting the adviser's fiduciary status and disclosing the level fee in advance of the transaction, and will need to document how they made the decision with the client's best interest in mind.

Several advisers asked the attorney why they have to change the way they operate when they don't receive commissions on products and already pledge to make decisions in the best interest of clients. But those who helped NAPFA and a broader financial planning coalition win changes in the final rule reminded advisers how much worse the proposed version of the regulation was, in terms of onerous compliance.

David O'Brien, founder of Evolution Advisers and chairman of NAPFA's public policy committee, reiterated that “this is a step in the right direction to protect Americans from bad behavior that's out there.”

Marilyn Mohrman-Gillis, CFP Board managing director for public policy and communications, tried to explain how the rule would apply to them.


When an adviser recommends that a client roll assets from a 401(k) account into an individual retirement account that the adviser will manage for a fee, that is a limited conflict of interest because the adviser is going to be making more money, she said.

“I don't think our members should be afraid,” Geoffrey Brown, CEO of NAPFA, said in an interview after the session. “I think they should be interested in making themselves knowledgeable about what the rule says and what the implications are for their business models.”

The association plans to provide its members with direction on things to consider as they envision how they'll meet the rule's requirements.


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