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DOL Finalizes Fiduciary Rule

On April 6, the Department of Labor released final rules to expand the “fiduciary” standard to more retirement accounts.  The rules were proposed in April 2015 (following the withdrawal of a 2010 fiduciary proposal).  According to the DOL’s fact sheet on the rules, the Department “received extensive feedback from the industry, advocates, Congress, federal and state regulators, and others.”  The DOL stated that the final rule “reflects this input and is better for it.”  According to the DOL, changes reflected in the final rule include:

  • A clarification of what constitutes fiduciary advice
  • Expands the availability of the best interest contract (BIC) exemption
  • Streamlines the requirements of the BIC exemption
  • Grandfathers existing investments
  • Extends the time period for implementation of the rule.

In a roundup of reactions to the rule in the Wall Street Journal, a number of industry participants indicated that they are pleased with the changes to the rule.  For example, John Thiel, head of Bank of America’s Merrill Lynch stated, “[w]e are pleased that Secretary Perez and the Department of Labor staff have worked to address many of the practical concerns raised during the comment period.”  

Not everyone was as optimistic, however.  SIFMA remains concerned that the rule “could force significant changes to current relationships, which may leave clients without the help they need to prepare for retirement, at a time when we all agree that more can and should be done.”  Expressing similar concerns, SEC Commissioner Piwowar stated that the rule “seems to ignore the chorus of voices that questioned whether it will restrict middle-class families’ and minority communities’ access to professional financial advice,” adding, “I am fearful that those concerns, which were widely and bipartisanly held, will prove to be true once the rule becomes effective.”