If the land of fiduciaries were a country, it would be one without rigidly defined borders. There is no Maginot Line. People have different opinions about who is a citizen here.

   To many financial planners, for example, it simply means someone who gives investment advice and puts the client's interest first, not that of a fund company, bank, insurer, or brokerage. However, the sweeping new pension law signed by President Bush in August has empowered a lot of reps from these industries to climb the fences and sweep over the borders without fear of being sent packing.

   Under the new law, known as the Pension Protection Act of 2006, representatives from those industries are given more motivation to offer specific financial advice to 401(k) participants, and even recommend specific investment options that generate fees for them, as long as they do so in an eligible arrangement with the plan sponsors under the cloak of "fiduciary advisor." So the country is getting a little bigger. And smaller.

   Different groups have been vying to define the term fiduciary and create more rigorous standards for its use, and the issue has become even muddier with the enactment of the new law, signed in August of last year. Some complain the new law doesn't explain what a fiduciary does so much as who can be one, and doesn't raise the standard. Some say that the law will provide more competition for planners as it gives banks, brokers, and insurers expanded legal scope, making them more comfortable giving advice. But some others say that brokerages will still be skittish to let their reps act as fiduciaries because many legal aspects are still obscure. And still others in the financial planning community say there is a gray area about when a person such as a broker will be acting within the compass of "fiduciary advisor" and when that person will take off his mantle and leave fiduciary land, perhaps for a place called "Brokerville."

   To be sure, the act has a lot of fans in the advisor community, since it allows companies to automatically enroll employees in 401(k) plans and gives the employers more of a safety net to get investment advice to their plan participants. The hope was to goad consumers into diversifying their assets (the Enron debacle being fresh in people's minds) and get their funds out of money market accounts. One of the obstacles to this has been employees' confusion over what to do with their money and the employers' unwillingness to give counsel, lest they get sued for bad advice. Similarly, representatives of wirehouses and brokerages have been reluctant to act in a fiduciary capacity and give specific advice for fear of running afoul of the law.

   To address the problem, the Pension Protection Act has expanded the compass of safe harbor for the plan sponsors by allowing some activities previously prohibited by the Employees Retirement Income Security Act of 1974 with some new exemptions.

   "Now the fiduciaries have the blueprints to structure these arrangements, get the fees and provide the advice," says Terese M. Connerton, an attorney with Ober Kaler in Washington, D.C. who has been working on ERISA issues for 25 years. "The main part of the exemption is that plan sponsors or other fiduciaries that hire a fiduciary advisor and come within this exemption will not be liable under ERISA for the advice that the fiduciary advisor gives to the participant."

   Still, given the differing opinions and standards for the word "fiduciary" proffered by different groups, there's been confusion about who is a fiduciary now, who was one in the past, and who was one all the time. "There is a lot of confusion, especially with the planning community," says Connerton, "And it is important that they understand what the limitations are and also understand that advice can be given even if they don't fall within this exemption."

   Under the arrangement given by the new law, the fiduciary advisor may use a certified computer model and receive variable fees or provide advice without a computer model as long as the fees don't vary.

   Every year the plan sponsor has to have the arrangement audited by an independent fiduciary to make sure it complies with the exemption. This has caused some confusion among fee-only planners, those working outside of these arrangements, that the audit might apply assets to them if they advise 401(k) assets independently, though Connerton says it doesn't.

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