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DOL Fiduciary Rule Update: What the Extension Means for your Business

After taking years to develop and almost 193,000 comments in the recent comment period, the Department of Labor (DOL) delayed the April 10 implementation of the Fiduciary rule for 60 days, until June 9, 2017. The rationale was to allow additional time to comply with President Trump’s memorandum asking the DOL to perform this examination and analysis.

The delay impacted the Fiduciary Rule and related exemptions. The three important takeaways for most firms and advisers are:

  1. The expanded definition of “fiduciary” investment advice will become effective on June 9, 2017, rather than April 10, 2017.
  2. PTE 84-24 will persist for all annuity recommendations –fixed indexed and variable annuities – until January 1, 2018.
    1. The Impartial Conduct Standards will apply under PTE 84-24 on June 9, 2017
  3. During the transition period, June 9, 2017 to January 1, 2018, the only requirements that apply are the Impartial Conduct Standards.
    1. Which means that no transition period disclosures will need to be provided.

As a result of the delay, the “old” rules will apply to the sale of investments (including insurance and annuities) and investment advice to IRAs and ERISA plans for another 60 days. Additionally, until June 9, 2017, many firms and advisers will not be classified as fiduciaries and will not need to comply with a prohibited transaction exemption to do business.

The delay, although expected, was opposed by many organizations and individuals.  In fact, 92% of the comments supported “no delay”.   Many of the comments supporting the delay related to “more time is necessary to properly implement the rule”.  For those firms that have not finalized their implementation plans, the delay provides some breathing room.  For those firms that did not think the rule would ever apply, they now have a short window to get ready for a new business model.   As the Trump administration continues to evaluate the regulatory priorities such as Dodd Frank, the Fiduciary Rule will continue to be a subject of much discussion.  The industry is already migrating to a Fiduciary Standard – it is now a value proposition question.

This piece was co-authored by:

Frank Kimball_2Frank Kimball is an Expert Practitioner with the North Highland Company. He has over 25 years of experience in the Financial Service Industry. He has held executive leadership positions in Retail Brokerage, Asset Management, and Corporate Trust as well a senior member of Corporate Strategy. He helped create an award winning value-add program providing ERISA advice and proactive tools to help Financial and Private Client advisors at wealth management firms to grow their retirement practice. He has developed and managed infrastructures for sales organizations providing necessary tools to grow sales and retain clients. His primary focus is in Wealth Management, Compliance, Risk Management and Trust.

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