The Department of Labor delivered on a longstanding but controversial promise when it recently proposed a fiduciary duty rule for all brokers who work with retirement accounts. The primary purpose of the proposed rule is avoidance of conflicts of interest.

If the proposed rule becomes final in its current form, it will have the following impact:money.jpg

  1. Anyone who is paid for providing individual advice to a plan sponsor, a participant in a retirement plan or an IRA for consideration of investments will be a fiduciary.
  2. It will continue to be acceptable for a plan sponsor and providers to continue educating investors in workplace plans and IRAs without being considered a fiduciary.
  3. Any fiduciary adviser must provide investment advice that is impartial and in the best interests of the client.
  4. Under what is called the “best interest contract exemption”, firms and individual advisers operating in conformity with the exemption can receive commissions and revenue sharing, but have to act in the clients’ best interests, and disclose potential conflicts and hidden fees.

This rule is a long way from becoming final, and, for that matter, may never become final. Nevertheless, the trend is set. Maybe the SEC will be next. . . .

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