In the meantime, the DOL’s impartial conduct standards are already in full force, Wagner said. A number of firms, including LPL Financial, began adopting the standard last year.
The rule requiring financial professionals to put investor’s interest first when selling or recommending retirement investments, IRAs and annuities is a first for much of the industry, including brokers and insurance agents. While advisors do have an explicit fiduciary duty to investors, the DOL’s rule goes significantly further, Wagner said.
The SEC requires advisors to “merely disclose conflicts,” she added. “Under the DOL rule, the definition of fiduciary has expanded. In 18 months when the rule goes into full effect, if you disclose a conflict for which there isn’t an exemption, you’re giving people a roadmap to sue you. This is a fairly high standard,” Wagner said.
‘A lot of the operating standards, reporting, disclosures, representations and warranties may change and I do think that some may be weakened in the process,” Wagner said. “But the concept of who is a fiduciary is here to stay. That means if there are contractual issues between a broker-dealer and an IRA, you’re in a position where you can have real class-action lawsuits,” the veteran attorney said.
“This law is finalized. I don’t think the courts will have much ability to overturn it. And I’m not sure, frankly. it matters much what happens in the court system because the standard best practice is fast becoming that financial advisors, broker-dealers and registered reps are holding themselves out as providing the best standard of care. The basic question of who is a fiduciary is settled,” Wagner opined.