Will DOL’s new rules end fiduciaries’ conflicts of interest?
Whether it’s money for the advice offered or payments for pushing certain providers’ investment products, the DOL has long contended that investment advisors are in danger of having a conflict of interest regarding the advice they provide retirement plans.
So the agency just released a 120-page set of proposed rules (the first on this subject since 2010) in the hopes of remedying this situation.
Here are some of the major highlights (so you don’t have to sift through the fed’s document):
Key protections, ‘Carve outs’
The DOL claims these rules will save billions of dollars over the next decade by:
Expanding what type of retirement advice is covered by fiduciary protections. Under the updated definition, any individual receiving compensation for providing advice that is individualized or specifically tailored to a plan sponsor for making an investment decision will be considered a fiduciary.
The proposed rules also aim to create greater transparency about plan fees by forcing adviser to: “clearly and prominently (disclose) any conflicts of interest, like hidden fees … that might prevent the adviser from providing advice in the client’s best interest.”
This could result in practices like revenue-sharing being greatly altered or eliminated altogether.
Carving out any investment advice that’s provided as general education on retirement savings from fiduciary status.
Carving out “order taking” as a fiduciary activity. In other words, if an advisor simply executes a transaction without providing any advice, it wouldn’t count as a fiduciary activity.
Carving out sales pitches to plan fiduciaries with financial expertise. So, in certain situations, if a plan fiduciary with this expertise from an advisor receives compensation for that advice, it wouldn’t be considered fiduciary activity.
