An Introduction to the D.O.L. Fiduciary Rule
I've done a lot of talking about fiduciaries, but perhaps it would be a better idea to go into some further detail on the official fiduciary rule from the Department of Labor (DOL). The reason I bring it up today is that there has been a proposal from the Trump Administration that would like to delay the rule further from it's scheduled implementation on April 10, 2017 for reasons unknown, other than the fact that they may try and repeal it, but doing so does NOTHING to protect the consumer or the general public. Without this rule in place, anyone can call themselves a financial advisor and pay themselves however much of the client's money they want to in an effort to make them earnings in the stock market just to keep them customers.
What exactly is the 'Fiduciary Rule'?
On April 6, 2016, the U.S. Department of Labor (DOL) issued its final rule expanding the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (ERISA) and modifying the complex of prohibited transaction exemptions for investment activities in light of that expanded definition.
The final rule retains critical elements of the April 14, 2015, proposed rule making, including:
Significantly expanding the circumstances in which broker-dealers, investment advisers, insurance agents, plan consultants and other intermediaries are treated as fiduciaries to ERISA plans and individual retirement accounts (IRAs), and are therefore precluded from receiving compensation that varies with the investment choices made or from recommending proprietary investment products absent an exemption;
Providing new exemptions, and modifying or revoking a number of existing exemptions, addressing those activities; and
Retaining the ERISA distinction between non-fiduciary “investment education” and fiduciary “investment advice.”
Effective Date: June 7, 2016 (60 days after the scheduled Federal Register publication date of April 8)
Applicability Date: Generally, April 10, 2017, with a further transition period for many requirements of the BIC exemption to January 1, 2018, and a conditional grandfather rule for certain arrangements existing before April 10, 2017.
The rule is at risk for not being enacted as soon as possible, if you feel so inclined, you can leave a comment on this proposal to reverse the delay BY CLICKING HERE. I have already told the DOL my two cents and quite frankly, I don't think there will be any new arguments brought about in delaying the process further.
This law is already in effect for accountants and lawyers -- make it so for all investment advisors and financial planners. Thank you!