In “More Rollovers May Soon Be Held to a Fiduciary Standard,” benefits and executive compensation partner Fred Reish spoke to Barron’s about potential changes to retirement savings rules, such as how advisers may be held to a ﬁduciary standard when recommending rollovers to investors starting on Dec. 21.
As firms try to meet the new requirements in time, Reish said it “has turned the rollover world on its head. A whole series of steps have to be taken to adjust to this standard.” Further, he explained that many people were surprised, and “no one was really preparing because everyone believed it would be extended or killed.”
In response to the amended regulatory definition of the term “fiduciary,” Reish said, “You take a few exceptions oﬀ the board, and almost all recommendations and all securities-based recommendations will be ﬁduciary-based recommendations.”
According to the publication, another key change is to the “mutual understanding” part of the test. Previously, advisers and broker-dealers could rely on disclaimers stating that there is no mutual understanding to avoid being considered ﬁduciaries. However, that’s no longer going to pass muster with the Department of Labor, Reish stated. The standard is now “would a reasonable third party believe that there is a mutual understanding? That shook some things up because a fair number of ﬁnancial-services ﬁrms were relying on disclaimers.”
Reish also commented on the impact on small wealth management firms. “There is one condition that there be an annual retrospective review that is in writing and signed by a senior oﬃcer of the ﬁrm,” he noted. “For a small advisory ﬁrm with two or three advisers, that’s a lot of work.” Larger ﬁrms are generally better prepared thanks to their scale and resources, Reish continued.
Regarding when the new regulatory requirements take effect, Reish concluded, “At the stroke of midnight on Dec. 21, all the conditions come into play.” He added, “Everyone has to have their disclosures, policies, procedures, and training in place and done. That’s what everyone is working on now.”
The full article is available for Barron’s subscribers.