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Fiduciary-Rule Review Zeroes In on Industry Costs, Liabilities
The Wall Street Journal; July 10, 2017
The Trump administration in recent days has raised questions about the impact of the fiduciary rule’s compliance costs and legal liabilities, a sign that the rule meant to protect retirement savers from conflicted advice may survive a review without some of its primary enforcement provisions.
In a legal brief this past week, the Labor Department urged the U.S. District Court for the Northern District of Texas to uphold its February ruling against business groups seeking to quash the fiduciary rule, but the agency said it doesn’t stand by a condition in the Obama-era rule that allows investors to bring class-action suits against brokers who they say failed to act as fiduciaries.
Separately, in opening a new comment period on the rule and a potential delay of its Jan. 1, 2018, deadline for full compliance, the agency asked pointed questions to gauge costs to the financial-services industry. Writing that commenters have been divided on best-interest contract requirements throughout the rule-making process, the department said that it “is interested in the possibility of regulatory changes that could alter or eliminate contractual…requirements.”
The ABCs (and T’s and Z’s) of the New Fiduciary Rule
The Wall Street Journal; July 9, 2017 10:10 p.m. ET
The Labor Department’s new “fiduciary” rule is meant to protect retirement savers from conflicted investment advice, by requiring that a financial adviser put the client’s interest first.
But it can’t protect them from this side effect: a raft of new terminology and mutual-fund share classes to decipher.
Mutual-fund companies have been introducing an alphabet soup of share classes or expanding the use of existing share classes to help financial advisers comply with the landmark rule. So, this is a good time to sort out the related terminology, old and new, and the share classes such as A, R, T, Z and “clean shares,” that are growing up around the rule or being disrupted by it…
Should You Dump Your Broker Because of the Fiduciary Rule?
The Wall Street Journal; July 9, 2017 10:09 p.m. ET
It’s time for investors to think again about what they want and what they can expect from the professionals who handle their accounts and give them advice.
Why now? Because a new Labor Department rule that began to take effect in June holds brokers to a fiduciary standard—meaning they have to act in the best interest of their clients—when offering guidance on tax-favored retirement accounts like 401(k)s and IRAs. Previously, the standard for brokers was less strict: They were required to offer only “suitable” guidance.
The new rule doesn’t apply to nonretirement accounts; brokers still only have to meet the suitability standard for those. And it doesn’t dramatically affect investment advisers registered with the SEC, who already were held to a fiduciary standard for all accounts in advising clients on how to invest. (One way it does affect them is by applying a fiduciary standard to their advice on withdrawals from retirement accounts.)
More Exemptions May Ease Pain of DOL Rule
InsuranceNewsNet; July 7, 2017
New Labor Secretary Alexander Acosta is walking a fine line between legally defending the Obama-era fiduciary rule, while trying to make the rule more palatable to the financial services industry.
The fiduciary rule is to financial advisors what Mt. Everest is to high altitude climbers: a massive hurdle – but still scalable if you have help threading your way through.
On Thursday, the Department of Labor indicated it was prepared to help advisors with their uphill climb by possibly carving out new exemptions and amending existing ones — the equivalent of securing fixed ropes to help climbers on their way.
Recent innovations in the financial services industry are helping to create more streamlined exemptions and compliance mechanisms, the DOL said in a 13-page request for information (RFI) published in the Federal Register.
Fate of FIAs Rests With DOL Rule Retooling
InsuranceNewsNet; July 7, 2017
The Department of Labor wants to remake the Obama administration fiduciary rule.
Could this week’s Department of Labor’s request for information on the fiduciary rule signal an opening for the return of fixed indexed annuity (FIA) sales under a less stringent exemption?
The possibility gives policy analysts like Judi Carsrud, government affairs director for the National Association of Insurance and Financial Advisors, hope that advisors will get another shot at making life easier for themselves in the years to come.
Nothing would please Carsrud and other annuity advocates more than if DOL regulators shifted FIAs out from the burdensome Best Interest Contract Exemption, or BICE, and back into the less-stringent Prohibited Transaction Exemption 84-24, or PTE 84-24.
As DOL's Rule Stalls, Other Policy Makers Take Up Slack
Financial Advisor; July 7, 2017
While the future of the Department of Labor’s fiduciary rule-making remains in doubt, new best-interest standards are being applied on advisors from several different angles.
In June, Nevada fast-tracked Senate Bill 383, which applies a fiduciary standard to all broker-dealers, sales representatives, investment advisors and advisor representatives.
“As more attention is being brought to this issue and states have seen the DOL bogged down, they’re taking matters into their own hands,” says Scott MacKillop, CEO of Denver-based First Ascent Asset Management. “In concept, that’s a good thing, but I’m concerned that we may end up with 50 different fiduciary standards to navigate.”
Nevada’s law requires that advisors undergo a fact-finding and discovery process each time a client is on-boarded, and on an ongoing basis. When a recommendation is rendered, advisors will have to disclose any potential gain that they may receive if their advice is followed.