After several proposed versions of the rule over the last six years, the DOL has released the final Fiduciary Rule. Largely similar to the proposed rule from 2015, the final rule has a very broad definition of what constitutes 'fiduciary advice'. However there is more flexibility under the final rule indicating the DOL took the numerous comments from the industry to heart (at least in part). Advisors will need to be more cautious with their advice, since most actions taken by advisors will now be 'fiduciary' in nature.
Main Elements of the Rule
- The rule requires advisors to put their client's best interest first, by increasing the types of retirement advice considered to be 'fiduciary' in nature, and provides a list of what is 'fiduciary advice'
- The exemptions will allow firms to receive routine forms of compensation such as commissions and revenue sharing, as long as they put their client's 'best interest' first
- The Best Interest Contract (BIC) Exemption is available for more types of advice than under the proposed rule
- Advisors are held accountable to their clients if they provide advice that is not in their clients' best interest
What Does this Mean for Clients?
For Heffernan clients, there will be no practical impact once the Final rule becomes effective. Heffernan advisors have always operated with the clients' best interest as the guiding principal of any action, fiduciary in nature, or not.
Going forward in 2017, service agreements will contain specific language alerting clients that advisors are acting in their best interest.
The rule will likely have the most impact on IRAs, which the government cited as often containing assets invested in products providing payments that generate conflicts of interest.
Clients of Heffernan can already feel confident their best interests are placed ahead of profits.
The rule begins to take effect in April, 2017 with full implementation on January, 2018. The rule is published
in the Federal Register. A helpful fact sheet is posted
Blake Thibault, Managing Director