The Conflict of Interest Rule: a lesson from the UK and Aviva

October 26, 2016 by Anthony Stich

about the author:

Anthony Stich

Chief operating officer

Anthony Stich has one goal: to develop a team of exceptional customer success leaders across the globe, empowering them with the latest methods of strategic planning, content development, and lead generation to successfully grow Advicent, the leading provider of SaaS technology solutions for the financial services industry, into a global brand. Published in numerous global outlets including the Journal of Financial Planning,, Investopedia, and bobsguide as well as being featured on Financial Advisor IQ, Asset TV, and Bank Bosun, Stich has swiftly become a thought leader in the FinTech space, providing compelling statistics, a thought-provoking perspective, and much-needed humor in a rapidly-changing industry.

Many people argue that the new Conflict of Interest Rule by the Department of Labor was inspired by the Retail Distribution Review (in the United Kingdom) which is regulated by the Financial Conduct Authority (FCA). In fact, Advicent has written about this in the past and do feel that the similarity between the two regulations are uncanny. So much so, that we feel comfortable in stating that what happens in the UK will likely happen here in the near future.

With that, here is news from across the pond:

Aviva has been fined more than £8.2m by the FCA for not having appropriate controls over its outsourced providers to ensure client assets were protected.

The £8.25m fine for Aviva Pension Trustees UK and Aviva Wrap UK is the first the FCA has handed out for oversight failures in outsourcing arrangements for client assets.

The FCA says Aviva failed to put in place appropriate controls over third party administrators to which they had outsourced the administration of client money and external reconciliations in relation to custody assets.

The regulator says Aviva also failed to dedicate adequate resource and technical expertise to enable them to implement effective oversight arrangements, resulting in their delayed detection and rectification of client asset risks and compliance issues.

What does this mean in the U.S. regarding the Conflict of Interest Rule?

Now we might not see this type of action immediately but bear in mind that the RDR was implemented a few years back. As we have experienced with regulation in the past (see Dodd-Frank), “regulation creep” will occur, and we will likely experience the Conflict of Interest Rule grow in time.

There is one more thing to remember – this is not the first time Aviva was fined:

The FCA also fined Aviva Investors, the insurance giant’s investment management arm, £17.6m last year for not having systems and controls in place to manage conflicts of interests fairly.

Regardless of wrongdoing—we do not know enough about this particular case, or whether or not Aviva is in the wrong—the new norm is coming, April 7, 2017, whether you are ready or not.

Click here to learn about how Advicent tools can be leveraged in a DOL compliance strategy.

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