The Department of Labor’s fiduciary rule on retirement advice is taking effect today.
After much delay and uncertainty, particularly in the last six months under the new administration, retirement advisors now must put investor interests first when choosing products and determining fees for their services.
Full implementation of the rule isn’t expected until January 2018, when all-out enforcement of the rule will kick in. What that means is that between now and then, advisors and firms must show “good faith” and be able to demonstrate they are acting as true fiduciaries if the DOL comes knocking on their door. In other words, enforcement is months away, but the heart of the fiduciary rule is in effect starting today.
Showing The LegWork
The industry has been getting ready for this for a long time, and most advisors already act as fiduciaries under the Securities and Exchange Commission. The big difference is that until now, no one had to really worry about showing the legwork that goes into product selection and compensation to demonstrate they are in fact putting investor interests ahead of their own.
It’s that compliance demand—or homework, if you will—that’s really a big change for most advisories—the question of how to prove they are doing the right thing by investors.
“There’s a high degree of uncertainty as to what ‘good faith attempt’ means for a firm,” Envestnet’s Steve Boms, VP of government affairs, said. “And even though RIAs serve as fiduciaries under the SEC, they’re now looped into DOL compliance, too. There’s a whole new apparatus that RIAs under the SEC will have to make sure they are compliant with.”