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Advisors, brokers slacking on compliance under fiduciary rule
BenefitsPro.com; JAN 30, 2018
More than six months after the Labor Department’s fiduciary rule was partially implemented, anecdotal evidence is emerging that industry is struggling to comply with new requirements on investment recommendations in qualified retirement accounts.
Specifically, brokers and advisors are failing the rule’s best interest standard when advising on distributions from employer-sponsored retirement plans and rollovers to IRAs, according to Fred Reish, a partner at Drinker Biddle & Reath and chair of the law firm’s Financial Services ERISA team.
“I’m concerned folks are short-circuiting processes in a way that isn’t compliant,” Reish said during a recent webinar.
The rule’s impartial conduct standards, which were implemented last June, require that advice on qualified retirement accounts be given in investors’ best interest. Brokers and advisors can only charge reasonable fees, and they are prohibited from giving misleading information.
While compliance with the full extent of the rule’s warranty and disclosure requirements has been delayed until July of 2019, any recommendation to roll 401(k) assets into an IRA is considered a fiduciary act, and must be done in an investor’s best interest.
FSI Says Its Lobbying Efforts Are Helping Shape Fiduciary Rule
Financial Advisor; January 30, 2018
The Financial Services Institute’s proposal for streamlined, simplified conflict of interest disclosure appears to be making its way into the SEC's best interest proposal.
“Earlier this year we had meetings with [SEC] Chairman Jay Clayton and [SEC Director of the Division of Trading and Markets] Brett Redfearn and we are ... hearing that many of our themes that we’ve hit on in our advocacy” are starting to find their way into the proposal, FSI President Dale Brown told reporters at the FSI One Voice Conference in Dallas on Tuesday.
FSI represents independent broker-dealers and their affiliated advisors.
According to Brown, provisions in an early draft of the proposal include:
- Short-form disclosure of conflicts of interest and compensation methods at the outset of engagement with clients.
- An SEC template that all firms and practitioners could use for disclosure.
- A clearly articulated, single, best interest of care.