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DOL Unveils Fiduciary Rule Guidance

October 28, 2016

The Department of Labor has rolled out the first set of clarifications on its fiduciary rule, which requires retirement brokers to put clients’ interests first and goes into effect in April. And the FAQs couldn’t come out at a better time, as a new survey finds advisors are confused about the rule’s impact on their business.

As promised earlier this week by Phyllis Borzi, head of the DOL’s Employee Benefits Security Administration, the first set of FAQs includes 34 answers and focuses on the best interest contract exemption, which allows brokers to sell some commission-based products after signing a best-interest agreement with the client. There are no real surprises in the answers, Joshua Waldbeser, at attorney with Drinker Biddle & Reath, tells ThinkAdvisor. For example, the FAQs explain that the DOL rule allows for volume-based commission grids as long as they’re properly structured, he tells the publication. Meanwhile, back-end sales goals written into recruitment bonuses may be in violation of the BICE, the FAQs explain, but the DOL says it will provide “transition relief” to firms already working under such contracts, Waldbeser tells ThinkAdvisor.

In its FAQs the DOL also clarifies that the BICE exemption is available for all types of products both for retail advice and for individual retirement account rollover recommendations, the publication writes. The agency also says the full BICE doesn’t apply to automated platforms where advice is provided only through an interactive website and involves computers only, according to ThinkAdvisor. The FAQs additionally include clarifications on grandfathering relief, according to the publication. Meanwhile, more FAQs are expected to come out before the end of the year, Borzi said earlier.


And the industry appears to need clarification, one source suggests. A new survey claims that most advisors are "confused" about the DOL rule. The majority of advisors manage retirement accounts: 52% say more than half of their customers are retirement clients, 20% have between one-fifth and one-half of their clients in retirement accounts, and 6% only serve retirement investors, according to a survey of 300 Massachusetts investment advisors conducted by the state’s securities regulator. But only 61% of respondents believe the rule will have an impact on them, according to the survey. The survey demonstrates a need for training advisors on the rule, claims the regulator, which promised to do the job.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.