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401k Fiduciary Rule: ‘Everyone Shares the Blame’

ERISA lawyer Clark made no bones about his feelings

The rules a-comin'. What now?The rules a-comin'. What now?

What concrete actions should advisors be taking to prepare for the full implementation of the Department of Labor’s Conflict of Interest Rule, the pending 5500 rules and the likely release by the SEC next year of a “uniform fiduciary standard?

It’s a lot to tackle, but a panel of high-profile experts, each with vastly different views of the recent DOL action, did just that at Excel 401(k): The Advisors’ Conference Monday morning in Las Vegas.

The discussion featured moderator Pete Swisher, senior vice president and national sales director with Pentegra Retirement Services, as well as Blaine Aikin, president and CEO of Fi360 and Thomas Clark of The Wagner Law Group.

Swisher began by noting the 401(k) industry’s initial response to the rule, which he claimed was, “How dare you! We will fight this to have it overturned.”

He then asked Aikin to describe the events that’s brought the industry to its current point regarding the fiduciary rule.

“Happy to do so, but I won’t spend much time doing it as doesn’t help us much with the discussion of what advisors should do next,” he mercifully answered.

While Aikin has been long and widely noted to approve of the rule (little surprise given the organization he helped found), Clark made no bones about his feelings.

“Everyone shares a little bit of the blame for the rule,” Clark fumed. “ERISA was passed in 1974 and some of the people involved are still around and practicing law. The reality of ERISA is that it was passed at a time when defined benefits were dominant. They thought it would be updated and would have amendments and certainly require mandated benefits. A lack of policing is some of our fault and I really want to blame Congress, but there’s enough blame to go around, even thought we needed a scalpel, not a sledgehammer.”

Swisher added that the rule was “compensation driven, and broker-dealers are in the process of updating compensation plans, which is incredibly complicated. The amount you are paid is no longer a permissible consideration when developing a compensation plan. It’s now service-driven, how much work is done on the plan, as well as how you’re advising the plan. It must be at the very least revenue neutral.

The possibility of a uniform fiduciary standard from the SEC was then discussed, which Aikin agreed is likely to happen.

“As we look ahead, the DOL sealed a uniform standard’s fate by forcing the SEC’s hand, and it will now have to act to bring some sort of continuity,” he said. “But regardless of what happens, advisors need to step back from this obsession with regulations and look at why fiduciary came about and why it exists.”

He added that acting as fiduciaries can be “liberating, and we should now ask about how to raise the levels of our businesses, rather than focusing on the minutiae of the law.

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