A panel on day two of the Broadridge 360 Advisor Summit offered guidelines for new and experienced retirement plan advisors wanting to better understand the Department of Labor’s (DOL) fiduciary rule.
ERISA Attorney Jason Roberts, who is also founder and chief executive officer of Pension Resource Institute, a firm that services banks, broker/dealers (B/Ds), and registered investment advisors (RIAs) in construing and reacting to regulation, remarked how the new Retirement Security Rule expands upon the number of advisors subjected to being classified as fiduciaries.
Under the latest rule, the traditional five-part test from the Employee Retirement Income Security Act (ERISA) is replaced with a whole new set of guidelines that ropes in professionals who in the past were not deemed fiduciaries. Furthermore, advisors who had previously worked around the rule by only providing one-time advice would be deemed a fiduciary, as the regulation now combines all investment advice as a covered recommendation.
Similarly, firms that have provided advice on reinvesting the proceeds of individual retirement account (IRA) rollovers will also be making a covered recommendation under the fiduciary rule, added Roberts. “The definition that will apply establishes the point of recommendation—it’s not required for it to be established as a regular basis,” he said.
“Firms would formally say they are not providing advice but providing financial education,” he continued. “That opening is substantially more narrow now.”
Roberts included tips for both long-time and incoming fiduciaries, adding that for seasoned professionals, they should highlight their scope of non-investment services, including updating disclosures and agreements to show their value, insert themselves as part of the process with plan sponsors, and consider and investigate desired roles in pooled or group plans.
Emerging fiduciaries should prepare to deliver more value on burdensome issues for plan sponsors, investigate plan designs that shift administrative duties, and consider desired roles in pooled or group plan solutions.
Roberts also touched on the possibility that some professionals are considering leaving the industry as a result to the latest regulation. Instead, he suggests they lean into the new rule by training non-specialists on fiduciary processes and supplying them with investment toolkits. Moreover, businesses can require less experienced plan advisors to partner with home offices, affiliated-regional firms and/or third-party fiduciaries, and/or mitigate risk, scale, and add revenue streams using pooled employer plans (PEPs).
SEE ALSO:
- The Latest Changes Made to the DOL’s Final Fiduciary Rule
- Breaking Down the Basics: DOL Fiduciary Rule
- DOL Fiduciary Rule Hit With First Lawsuit
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
