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DOL Fiduciary News: March 17, 2017

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Morningstar expects up to $150M in annual class-action settlements under fiduciary rule; March 16, 2017

In a perfect world, all investors with qualified retirement accounts would have unfettered access to reasonably compensated fiduciary advisors offering non-conflicted advice on all investment options available in the market today.

And no one would get sued.

“That would be the best imaginable outcome,” says Michael Wong, a senior equity analyst for Morningstar Research Services. “The best circumstance would be the fiduciary rule goes through, everyone uses the BIC (best interest contract exemption), and there are no class action lawsuits.”

Trump fiduciary delay won’t bring free Super Bowl tickets back

Financial Planning; March 16 2017, 1:35pm EDT

President Trump may kill the Department of Labor’s fiduciary rule in formal terms, but the public wrangling has enshrined it in practice, according to two champions of the regulation.

PagnatoKarp CEO Paul Pagnato and Confiance CEO Pamela Sandy use the analogy of a train that has already left the station despite attempts to slow or stop it. The influential advisers and advocates spoke this week in the latest exclusive Financial Planning webinar.

FIA Yields That Clients May Never See

Retirement Income Journal; Wed, Mar 15, 2017

Not long ago, an investor read about a new, fee-based, fixed indexed annuity (FIA) contract with a crediting rate that was 50% richer than similar commission-based products. So he called an online insurance broker to buy it from one of their licensed agents.

Slight confusion ensued. The agent executed the paperwork, but when he contacted the life insurance company that issued the FIA, he found he couldn’t collect a commission or charge an advisory fee. Unsure what to do, the agent—who didn’t want his name used—completed the transaction anyway.

In the past six months, three life insurers have issued no-commission FIAs. They did so because many agents and advisors who have been selling FIAs on commission are expected to switch to asset-based compensation (in part to avoid signing the Department of Labor’s legally onerous “Best Interest” pledge). At least three more carriers are said to be building fee-based FIAs.

Will the DOL fiduciary rule kill 401(k) plan referrals?

InvestmentNews (commentary); Mar 15, 2017 @ 5:56 pm

Experienced defined contribution plan advisers are excited about the potential flood of referrals from less-experienced plan advisers not interested in acting as a 401(k) plan fiduciary when the DOL fiduciary rule kicks in.

Many less-experienced plan advisers are expected to refer current or potential 401(k) clients to more experienced plan advisers, but there's a catch. The referral may be considered a fiduciary act and questions of whether compensation for those referrals is reasonable will also arise, regardless of the DOL rule, which will make a fiduciary of anyone providing investment advice for a fee in retirement accounts.

So what does the future really hold for referrals of DC plans to advisers?

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