I'm a Fiduciary, You're a Fiduciary; Are We All Fiduciaries?
The DOL Fiduciary Ruling
Employers have always had a fiduciary responsibility to act in the best interest of their employees when creating and managing company-sponsored retirement benefits. However, that same standard of care wasn't required of the financial advisors or service providers that advise both the employer as well as individual retirement investors. In an effort to better protect retirement savers, the Department of Labor (DOL), under the Obama Administration, issued a ruling that expanded the definition of “fiduciary” and required financial advisors to comply with a fiduciary standard of care when providing advice. In its original form, the ruling required that retirement plan advisors who receive compensation to provide recommendations about retirement accounts, such as IRAs, 401(k) and 403(b) plans, to:
- Acknowledge their status as a fiduciary to the plan and adhere to a fiduciary standard of care
- Exercise prudent, independent judgement in regards to investments, services and transactions
- Structure compensation to be compatible with what the DOL considers a “level fee” arrangement, or be prepared to comply with additional contracting and disclosure requirements
While the ruling was scheduled for an implementation date of April 10, 2017, the transition of executive powers has impacted its rollout. On February 3, President Trump ordered further examination of the ruling to determine if it poses a regulatory overreach or adversely affects Americans’ ability to access retirement planning advice.
In response to President Trump’s memorandum, the DOL is proposing to delay the applicability date of the rule and some of its content for 60 days to conduct further studies on its potential effects on individual retirement investors as well as the financial services industry.
It remains unclear whether the ruling will be altered, delayed or struck down entirely. Assurance Financial Services (AFS) will continue to push forward in our ongoing commitment to cost transparency, fiduciary acknowledgment and participant financial wellness. AFS’s service agreement acknowledges our fiduciary status to our clients’ plans in writing and clearly discloses our compensation practices. In addition, our process for evaluating investments, monitoring and benchmarking fees, consulting on best practices and documenting procedures are structured to satisfy a fiduciary standard of care.
Many firms have devoted significant time and resources to comply with the original terms of the ruling and will likely keep forging ahead. While ancillary advisors and providers who aren’t committed to fiduciary best practices may lose competitive edge within the marketplace.
Regardless of the content and timing of the final bill, the inception of the ruling has forever changed the landscape of the retirement services industry. It has opened up a dialogue that can help plan sponsors and investors evaluate their financial professionals to ensure that diligence, prudence and accountability are at the forefront of advice offered to their plan and plan participants.
For additional information on the DOL ruling or Assurance Financial Services and our Retirement Plan Advisory Services, please contact Rich Cordova. Rich can be reached at email@example.com or 847.463.7344.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliatee of Kestra IS. Assurance Financial Services, Ltd and Assurance Agency, Ltd are not affiliated with Kestra IS or Kestra AS. Assurance Financial Services, Ltd is a wholly owned subsidiary of Assurance Agency, Ltd.
- Keep Your Mimosas Bottomless During Retirement
- Redefining the Participant Experience
- Retirement Plan Participant Video: Why it Matters
ABOUT THE AUTHOR