Late yesterday the DOL provided a statement that it has found no legal basis to postpone the June 9th (it goes into effect at 11:59 PM on 6/9/17 - so really
June 12, 2017) date for the DOL Fiduciary Rule's implementation. There is a transition period from June 9, 2017 through January 1, 2018 to phase in
the implementation with full compliance currently required on 1/1/18.
Could the January 1, 2018 date possibly change? Maybe. The DOL is analyzing the President's February 3, 2017 Memorandum, the
comments it received during the comment period and expects to issue in the near future a request for information on whether more time will be needed
from the industry for a full implementation. Comments from Labor Secretary Acosta seem to point to wanting the SEC to be involved in the development
of the fiduciary standard for these accounts. Attached please find the FAQ released by the DOL yesterday that provides additional guidance for
the transition period.
So, is the DOL Fiduciary Rule going away? No.
What happens on June 9, 2017 and what do I need to do? Well, it is the last day of IPI's Summer Conference and the DOL Rule
triggers two requirements for brokerage retirement accounts:
1. Defines who is a fiduciary under the DOL Fiduciary Rule - anyone providing investment advice to brokerage retirement accounts.
2. Impartial Conduct Standards are applicable for Brokerage Retirement Accounts. This means that for these accounts you must meet three (3) requirements:
1. At the time of a recommendation to a retirement client, provide the client advice in his/her best interest.
I have heard of best interest, but what does it mean? Best interest standard has 2 components --- duty of prudence and duty of
A. Under the prudence standard - you are required to investigate and evaluate investments, make recommendations and exercise sound judgment. This
means that you must do a thorough investigation with the retirement client to understand his/her needs, cirucmstances and objectives. Your recommendations
should be applicable to generally accepted investment theories such as modern portfolio theory. Any notes or documentation of your process for evaluating the client and the recommendations must be kept for at least 6 years. We recommend that you use Salesforce to retain your notes.
B. Under the loyalty standard - your advice must be based on the interests of the client rather than your competing financial interest. If anyone
has questions on this standard --- call me.
2. Do not charge/receive unreasonable compensation for retirement accounts - you must obtain the best execution reasonably available for the client under
the circumstances with respect to the transaction and receive no more than reasonable compensation. This means putting the client into cost efficient
products on the brokerage side that fit the client's objectives and needs or another option is to move the account to advisory and you would then automatically
be under the fiduciary standard (Series 65 or 66 required).
3. Do not make misleading statements about a recommended transaction, fees and compensation, material conflicts of interest and any other matters related
to the retirement client's investment decisions.
As most of our advisors are already fiduciaries on the IPI Wealth side, these items are a part of your daily conversations and actions with your clients
today. However, if you have any questions, please give me a call to discuss.
What is IPI doing to assist advisors with this implementation?
1. We will be working on adopting policies and procedures to ensure our advisors comply with the impartial conduct standards and communicate those to you.
Please understand that this will take time and the DOL is allowing the transition period so firms can take the appropriate steps for implementation.
2. As a way to mitigate conflicts of interest which is a key part of the DOL Rule, we will continue to seek out DOL compliant products such as clean shares
(no 12b1s) for mutual funds. We will communicate the information to you as it is available. If you are talking to wholesalers and have a DOL compliant
product that you are interested in, please let us know and we will complete our due diligence on it.
3. We will draft a Best Interest Contract --- this will take time as we want to ensure the soundness of the document. I expect this to be rolled out in
late 4th quarter 2017 with full implementation ready to go just in time for the holidays.
4. We will keep you up to date on any modifications to the Rule.
If you have any constructive suggestions, comments and/or ideas we would love to hear them as we work to implement these changes. Thanks, Renee