The DOL fiduciary rule has staying power: Are you prepared for June 9?

May 10, 2017 by Kate McBride

about the author:

Kate McBride

CEFEX analyst and founder of FiduciaryPath, LLC

Kate has been editor of the Fi360 Fiduciary Standard Survey since 2010, and is a founder and past Chair of The Committee for the Fiduciary Standard. Kate can be reached at

The first requirements of the Department of Labor (DOL) Conflict of Interest – Fiduciary Rule is scheduled to become effective on June 9, just a few weeks from now. That date is quickly approaching and the Fiduciary Rule will likely not go away, according to an article from The Wall Street Journal. Given the massive implications of the fiduciary rule going into effect, it is more important than ever to know how you and your firm will comply with the rule.

A brief history of the fiduciary rule

The DOL released a rule in April 2016 intended to close loopholes in ERISA that resulted in some financial intermediaries advising retirement plans, participants, and IRA account holders without fiduciary obligation. The DOL Conflict of Interest – Fiduciary Rule became effective last year with a grace period for firms to prepare for an April 10, 2017 effective date for first provisions and January 1, 2018 for the rest.

Due to the political changes in the federal government, a memo was issued on February 3 ordering the new personnel within the DOL to review the fiduciary rule. The new DOL issued a proposal to delay the fiduciary rule’s effective date so their new leadership could adequately review the rule. There were 178,000 comments against any delay and 15,000 comments for lengthy delays or to effectively kill the Fiduciary Rule.

On April 7, the new DOL concluded that

“…it would be inappropriate to broadly delay application of the fiduciary definition and Impartial Conduct Standards for an extended period in disregard of its previous findings of ongoing injury to retirement investors. For all the reasons detailed in the preambles for the Fiduciary Rule and PTEs and in the associated Regulatory Impact Analysis, the Department concluded that much of this harm could be avoided through the imposition of fiduciary status and adherence to basic fiduciary norms, particularly including the Impartial Conduct Standards.”

Therefore, the new DOL said in its announcement that

“…the fiduciary definition in the rule (Fiduciary Rule or Rule) published on April 8, 2016, and Impartial Conduct Standards in these exemptions, are applicable on June 9, 2017, while compliance with the remaining conditions in these exemptions, such as requirements to make specific written disclosures and representations of fiduciary compliance in communications with investors, is not required until January 1, 2018.”

The rule’s effect for financial advisors

What does this all mean to anyone advising retirement plans or participants, as well as with regard to IRA Rollover decisions and/or IRA account holders? From the same Federal Register release regarding the extension of the applicability date:

Among other conditions, the new exemptions and amendments to previously granted exemptions are generally conditioned on adherence to certain Impartial Conduct Standards: Providing advice in retirement investors' best interest; charging no more than reasonable compensation; and avoiding misleading statements (Impartial Conduct Standards).[2] The Department determined that adherence to these fundamental fiduciary norms helps ensure that investment recommendations are not driven by adviser conflicts, but by the best interest of the retirement investor.”

For those who anticipate using the Best Interest Contract Exemption – BIC – it, too, is slated to be effective on June 9, with some revision. The more extensive disclosures mandated as a BIC requirement are delayed until Jan 1, 2018, but the Impartial Conduct Standards will still go into effect on June 9.

Preparing for the future

While there still may be additional attempts to postpone, or completely reject, the Fiduciary Rule, preparing for the June 9 effective date will be prudent for financial advisors.

In fact, these best practices have been the focus of many industry professionals for years. Since 2010, the industry experts at Fi360 have annually surveyed financial intermediaries for their opinions and insights on fiduciary issues.

The 2017 Fi360 Fiduciary Standard survey is currently open to participants and can be completed by clicking here.

Completing this survey is a great exercise in exploring your own DOL preparedness while also providing invaluable feedback for the technology providers who move our industry forward.

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