What you should know about the new DOL Ruling

DOL LogoA few weeks ago, the Department of Labor (DOL) announced a new fiduciary ruling. The purpose of the rule was to impose a fiduciary standard on any advisor who provides advice or input regarding retirement accounts. The new rule updates a 40-year-old regulation to reflect today’s investment marketplace and to offer improved protections for consumers saving for retirement.

As a bit of history, the DOL’s purpose in issuing these new rules was to close “loopholes” in the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986, which enabled the securities industry to create “Individual Retirement Accounts” (IRAs) that did not provide investors the same investor protections offered by other retirement products.

Here are some of the more noteworthy changes the new ruling covers. Information on the complete DOL Fiduciary Standard rule can be found in this document.

  • Longer Implementation: Implementation of the rules will be phased in over the course of 21 months to give brokers time to adapt their business model when working with retirement customers.
  • New Customer Accounts: Service providers can include the best-interest contract exemption (BICE) as part of the documentation clients must sign to open an account. This removes the possibility of fiduciary liability for marketing to potential new clients.
  • Marketing of Plan Roll-Overs: Recommendations about how to invest client money and whether clients should take money out of a retirement plan such as a 401(k) now become fiduciary in nature.
  • Education: There is now greater leeway on educational exemptions. This is particularly useful to companies which want to ensure employees receive basic investment information. In contrast, exemptions are stricter with regard to individual retirement accounts. In these cases the DOL treats references to specific investment options as advice rather than education.
  • Low-Fee Products: Service providers do not have to recommend the lowest-cost investment option if a more appropriate option better suits the clients’ needs.
  • Grandfathering of Existing Arrangements: Service providers can continue to conduct business with clients under agreements signed before the rule becomes effective. This includes compensation from recommendations to hold and systematic purchase agreements. .
  • Insurance Products: The BICE allows advice relating to insurance products. Disclosure requirements for these products will be more compatible with the way that insurance products are sold. This also includes an exemption for fixed-rate annuity recommendations, but not variable-rate annuities.

In the end, the DOL rulings should have little impact on the relationship we have with our current customers because, we have always adhered to the Fiduciary Standard.  If you have any questions on how the DOL ruling impacts you, please feel free to contact the Financial Fiduciaries team.

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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