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.
The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.
Meet the Authors
