April 12, 2021

Brad Campbell Offers DOL Rule Compliance Advice for Smaller Registered Investment Advisers

In “RIAs Run Risk of Falling Short on DOL Rule Compliance,” benefits and executive compensation partner Brad Campbell discusses what registered investment advisers (RIAs) can do to comply with the new Department of Labor (DOL) fiduciary exemption rule, especially when it comes to rollover advice. 

According to WealthManagement.com, the rule’s “safe harbor” expires on Dec. 20, but it will take some time for RIAs to attain compliance before then. Campbell expressed particular concern for smaller RIAs that lack the compliance capability of larger firms. “They may not realize all of the steps that need to get done by December to be prepared for that changeover,” he said. “By December, you won’t have a fallback if you don’t meet the conditions.”

The rule could potentially expand the number of RIAs offering advice that would fall under Employee Retirement Income Security Act (ERISA) scrutiny, explained Campbell. “Most times in the past, that would not have been ERISA fiduciary advice ... but now, most of the time, it will be ERISA fiduciary advice because you intend to give them ongoing advice,” he said. “The only real exception is a one-time sales recommendation, and that’s typically not what RIAs are doing. For most RIAs, their business model is ongoing advice.”

Campbell added that for RIAs who work with companies advising them on plans, this kind of scrutiny is not new, but the rule will also capture wealth planners offering advice in the course of a long-term relationship. He believed the biggest potential for compliance lapses was with smaller RIAs.

If a firm’s business is in personal financial planning, rollover recommendations are likely to be an important part of many conversations about retirement, and across an RIA’s client portfolio, Campbell said advisers might face questions about rollovers on a daily basis.

“If I’m a personal wealth manager at a large RIA, they’ll tell me what to do,” Campbell noted. “I’m really thinking of those smaller RIAs who don’t do a lot of plan work who are the ones with the most potential to not realize how big an issue this can be for them.”

The full article is available for WealthManagement.com subscribers.

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