May 21, 2015

Client Alert: Impact of the DOL's Fiduciary Proposal on Independent Registered Investment Advisers

by Fred Reish, Bruce Ashton, Brad Campbell, Joan Neri, and Josh Waldbeser

This alert looks at the impact of the Department of Labor’s fiduciary proposal on independent RIAs. By “independent,” we mean RIAs that are not affiliated with a broker-dealer and do not sell proprietary products. A summary of our conclusions follows:

  • The proposal will have little impact on independent RIAs providing investment advice to plans, participants and/or IRAs because independent RIAs typically: (1) acknowledge fiduciary status; (2) charge a level fee for their services; (3) do not receive revenue sharing or other payments; and (4) do not recommend proprietary products.
  • One exception is that the proposed regulation defines fiduciary advice to include recommendations to participants to take distributions from retirement plans, as well as recommendations on how to invest assets to be rolled over or distributed from a plan or IRA. RIAs who make distribution or rollover recommendations that would constitute prohibited transactions will be required to comply with the proposed “best interest contract exemption” (“BICE”), which could be difficult and expensive.
  • RIAs can avoid the complexities of BICE by providing unbiased and materially complete education about plan distributions rather than making recommendations.

This is a brief summary of conclusions based on a very complex proposal. To read our rationale for these conclusions, click below.

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