On April 14, 2015, the U.S. Department of Labor (DOL) released its long-awaitedin its effort to redefine the term “fiduciary.” This is the latest attempt by DOL to replace its longstanding regulation defining the circumstances in which investment advice confers “fiduciary” status under ERISA. Furthermore, we want to remind all of our members that this rule is currently in the proposal stage. Therefore, there are no immediate compliance requirements.
The proposed rule would institute a broad new definition of the term “fiduciary” for the purposes of ERISA. Under this new proposed definition, an individual who provides investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner would be treated as a fiduciary in a wider array of advice relationships than under current requirements. This is a much more expansive definition and it will mean that more advisors will be considered fiduciaries when providing services to plans, plan fiduciaries, plan participants or beneficiaries, IRAs, or IRA owners.
We support a carefully-crafted, universal fiduciary standard of care that would be applicable to all professionals providing personalized investment advice to retail clients. This standard should apply to all products and account classes, and should be written in such a manner to preserve current compensation and business models within the financial services industry. Unfortunately, as currently written, DOL’s proposal goes beyond the creation of a fiduciary standard of care, and we are concerned that the proposal will make it harder for consumers to receive high-quality, personalized retirement advice. We are especially concerned that advice for clients with small account balances will become cost prohibitive if the proposal goes forward, as written, thus decreasing these clients’ access to retirement advice for a trusted advisor.
As we have continually said throughout this process, our goal is to constructively engage with DOL on this issue, and help shape any proposal so that it is workable for our members, helps protect investors, and preserves access to retirement advice. To that end, we are actively engaged with our members and DOL to address various concerns with this new proposal, and we will be working diligently to ensure that the voices of independent financial advisors, independent broker-dealer firms, and their clients are heard loud and clear throughout the regulatory process.
We appreciate your engagement on this very important issue, and we will provide updates on this site as the process moves forward.
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