Financial Advisor Magazine turned to benefits and executive compensation partner Fred Reish for insight on what advisers and broker-dealers need to know about complying with the new U.S. Department of Labor (DOL) fiduciary requirements when offering rollover investment recommendations.
In “Hybrid Advisors Should Comply Now With DOL’s Rollover Fiduciary Rules, Attorney Says,” Reish explained that while advisers have until Dec. 21 to comply, firms affiliated with broker-dealers will actually need to act much sooner. He discussed how the DOL has already set the compliance ball rolling by arming investors with eight questions they should ask advisers to ensure they’re acting in their interest when issuing rollover advice.
“The proposed questions accelerate the need to make decisions about compliance and to address those issues now when many financial institutions are still grappling with understanding the rules and deciding what compliance steps to take,” said Reish.
The questions put pressure on firms to accelerate their response to new DOL rules that allow fiduciary advisers to accept commissions and other prohibited compensation without triggering ERISA violations when they offer advice on rollovers, Reish said.
Reish also noted that while the DOL’s suggested fiduciary questions will be posed to advisers, the actual decisions about how a firm wants to satisfy the conditions will need to be made by broker-dealers. “As a result, some broker-dealers, and other financial institutions, including investment advisory firms, may decide to prepare written answers to those questions so that their hundreds or even thousands of investment professionals are giving the same answers to the same questions. That is an issue that financial institutions will need to deal with now — rather than Dec. 21 — due to these questions,” Reish said.
Further, Reish detailed how he is currently helping a number of broker-dealers comply with the complexities of the rules and that his experience is that broker-dealers are developing implementation plans with the Dec. 21 deadline in mind.
“However, several of the [DOL’s] questions are worded as if those rules were already in effect. As a result, advisers will need to closely coordinate with their broker-dealers to determine whether and how they can answer these questions. For example, it is possible that a broker-dealer will agree to make written declarations of fiduciary status at this time, even though it’s not [officially] required,” Reish said.