"The prohibited transaction rules do not necessarily apply" to such a planner, she says, "if he's getting his fee from the participant and he has no fees from the underlying investment or if he generates no fees from the underlying investment. And if he's truly an independent fiduciary, meaning he has no connection, he doesn't have to worry about prohibited transaction rules at all."
Those who do enter the agreements with plan sponsors to act as fiduciaries must disclose several items. Among other things, these include their affiliations and contractual relationships with third parties in developing the advice and picking investment options; the past performance and returns of the options available; the fees and other compensation they'll receive related to the advice that they give; and the advisor's role as a fiduciary in providing the advice. And they must disclose that the participant may seek advice from another advisor with no affiliation that does not receive fees based on the securities selected.
The Department of Labor issued a bulletin in early February that clarifies some questions about the fiduciary advisor's role, though more output is expected.
Duane Thompson, managing director of the Financial Planning Association's Washington, D.C. office, said the FPA gave the DOL its two cents on the matter in late January.
"We think form ADV should be used as a model for the registered investment advisor to satisfy the disclosure requirements," Thompson said. "We think that it makes sense to take the core elements of form ADV because planners already provide that to clients."
The FPA is currently working with two different task forces to better understand fiduciary issues, Thompson says. One is a task force looking at how a fiduciary duty might apply to a financial planner. The other is a task force for best practices for fiduciary advisors under the Pension Protect Act.