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DOL Fiduciary News: July 24, 2017

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DOL Rules Have Popularized ESG Investing Among DC Plans

PLANADVISER.COM | July 21, 2017

Two experts with Northern Trust Asset Management, Sabrina Bailey, global head of retirement solutions, and Mamadou-Abou Sarr, global head of environmental, social and governance (ESG) investing, recently penned a helpful analysis examining the proper role of ESG in defined contribution (DC) retirement plans.

Roughly two years after the Obama administration moved to open up the use of ESG investing factors under the Employee Retirement Income Security Act (ERISA), the pair say they are seeing tremendous interest from DC plan clients to use ESG to “mitigate risk, seek opportunities and offer more options to their participants.” ESG can help a sponsor meet all of these goals, Sarr and Bailey agree, but there are some considerations that must be taken into account to ensure ESG themes don’t conflict with the strict tenants of the ERSIA. 

“First and foremost, are there strong organizational values that should be reflected in the retirement plan investment menu?” Baily asks. “This is the beginning of defining the potential role of ESG in a DC plan. Women and Millennials in particular are creating demand for investments that align with the corporate values of their employers.”
(http://www.planadvisor.com)

4 Ways the Fiduciary Rule Could Hurt (Not Help) Investors

Kiplinger; July 24, 2017

The basic idea behind the Department of Labor’s fiduciary rule is good: to protect consumers seeking retirement advice by requiring advisers to put their clients’ best interests ahead of their own profit when making recommendations regarding their retirement savings.

I’m a fiduciary, and I wish every person giving financial advice acted under this standard, part of which took effect June 9. But I worry the rule, as it’s written, will cause more harm than good – that advisers will be hobbled and investors could be hurt. Here’s why:

Advisers might start hedging their advice. If a fiduciary doesn’t offer the mandated level of service, there can be serious ramifications – including potential civil and criminal penalties. There’s a sense in the industry that the new rule may make investors more litigious, which means advisers could decide to shield themselves by offering advice that’s more defensive for themselves than purposeful for the investor.
(http://www.kiplinger.com)

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