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DOL Fiduciary News: October 5, 2017

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SEC chief Jay Clayton tells lawmakers agency is drafting its own fiduciary duty rule

InvestmentNews; Oct 4, 2017 @ 2:00 pm

Securities and Exchange Commission Chairman Jay Clayton told lawmakers on Wednesday that the agency is drafting a proposal for a fiduciary rule.

The agency is trying to catch up with the Department of Labor, which partially implemented its own fiduciary rule in June and is currently conducting a review of the regulation's enforcement mechanisms as ordered by President Donald J. Trump that could lead to revisions. The SEC is currently receiving public comments about a fiduciary rule.

"The next step in anything like this would be a rule proposal. We're working on such a proposal," Mr. Clayton said in an appearance before the House Financial Services Committee. "We're going to work with the Department of Labor. If this were easy, it would already have been fixed."

As he did in testimony before the Senate Banking Committee last week, Mr. Clayton outlined the rubric that he would use for a fiduciary rule. It must preserve investors' choice to use a broker or investment adviser, be clear, and apply consistently to all types of investment accounts. It must also be the product of cooperation between the SEC and DOL, whose rule requires brokers to act in the best interests of their clients in retirement accounts only.

DOL fiduciary rule ups ante for monitoring of 401(k) record keepers

InvestmentNews; Oct 4, 2017 @ 2:20 pm

The Department of Labor fiduciary rule is changing how retirement plan advisers help their clients monitor record-keeping firms such as Fidelity Investments and Empower Retirement.

The regulation, which raises investment-advice standards in retirement accounts, has caused providers to alter how they interact with participants through their call centers. Several have said they will offer participants fiduciary guidance, such as advice on rolling over into individual retirement accounts, while others have indicated they will only interact with participants in a non-fiduciary capacity.

Monitoring such activity is uncharted territory for 401(k) advisers, and they're only beginning to flesh out how to carry out the responsibility.

"It's very new, and it's evolving," said Barbara Delaney, founder and principal of StoneStreet Advisor Group.

Industry Trends Threaten Traditional Broker/Dealer Model

Plan Adviser; October 04, 2017

Broker/dealers (B/Ds) can address new regulatory pressures, and new competition, by enhancing their value proposition and embracing technology, a report by Cerulli suggests.

Despite ongoing legislative battles to curtail portions of the Department of Labor (DOL)’s industry-sweeping conflict of interest rule, the regulation is under full implementation, as of June 9. The rule and other regulatory pressures have changed the way many advisers do business, and this shift could pose a major threat to the traditional broker/dealer model.

“One of the most important trends in the wealth management industry is the shift away from commissions to fee-based pricing,” notes Bing Waldert, managing director of U.S. research at global research and consulting firm Cerulli Associates. “Even if it is ultimately diluted, the DOL conflict of interest rule has reinforced the shift away from commissions to fees.”

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