On April 6th, 2016, the DOL’s final fiduciary rules regulations were published relating to fiduciary responsibility and exemptions. The fiduciary rule is hoping to lower billions of dollars of fees paid annually by small savers who transfer money out of a 401k, which are required to operate in the best interest of their clients, into individual retirement accounts, which are not bound by such protections.
As the responsibility of the carriers you do business with, many are reviewing the final rules. The original proposal had called for an eight-month implementation period. The final rule requires compliance for several broader provisions by April 2017 and fully compliant by January 1st, 2018.
While concessions have been made regarding additional paperwork when opening an account, you will only need to have new clients sign one best interest contract. For existing clients, a simple notice informing them about your new obligation does not require a best interest contract.
In other areas, the government tightened rules for one key sector that will make a difference for insurers. The early version excluded fixed insurance products. The final version included Fixed Index Annuities and would require a best interest contract.We will continue to provide you with timely updates as more information becomes available.
As carriers review the final rule, many are working with trade groups on their response as well as waiting for other regulators to respond. Legislative and legal alternatives may also come into play before the full compliance deadline of January 1st, 2018.
We will continue to provide you timely updates as information becomes available from the insurers.
Highlights from the DOL Ruling - A statement that the agent is acting in the best interest of the client will now have to be disclosed only as part of the documentation associated with the sale of the product, not when the agent first talks to the potential client.
- Under the BICE, firms (and their individual advisors) can continue to receive most common forms of compensation for advice to retail customers and small plan sponsors to invest in any asset, so long as the firms commit the firm and advisor to providing advice in the client’s best interest, charge only reasonable compensation, and avoid misleading statements about fees and conflicts of interest.
- Indexed annuities were removed from the PTE 84-24 insurance exemption and moved into the BIC alongside variable annuities
- Education is not included in the definition of retirement investment advice
- Firms will have one year to apply the broader definition of fiduciary. Full requirements will go into effect January 1, 2018
Further Analysis
The DOL’s final fiduciary regulations are a testament to the ever-changing environment of the financial industry. We find these regulations not to be challenges, but rather opportunities. Opportunities for you to further your desire to do what is in the best interest for the client.
In addition, these changes will likely drive out the advisors who largely earn a living by not acting in their client’s best interest; leaving you to capitalize on their absence.
Here at LifePro we are 100% dedicated to always providing products and strategies that are in the best interest of the client. Therefore we will be less affected than other firms and advisors who focus first on the commissions they earn rather than the benefits to the client they are able to create.
What You Can Expect
The recent regulations will likely attract substantial attention and possibly more legal action, amendments and legislation before they take effect. LifePro is dedicated to monitoring the rollout of these regulations and will keep you regularly informed all throughout the year.
Continue to monitor our news blog and upcoming emails for further information.
Official Ruling Documentation
Final Rule
Final BICE
Final PTE 84-24
Additional Resources