Commissions will not be outlawed when the U.S. Department of Labor submits its final proposal redefining the fiduciary responsibilities of advisors who recommend investments for clients’ retirement accounts, Assistant Secretary of Labor Phyllis Borzi told attendees at the Financial Services Institute’s first Advisor Summit in Washington, D.C., last month.

The final rule proposal might allow “potentially problematic, conflicted” transactions that might have a positive benefit, as long as these transactions were accompanied by appropriate disclosure, she added.  Addressing the widespread perception that she and the DOL think commissions are inherently conflicted, Borzi said, “Erisa (The Employee Retirement Income Security Act) doesn’t regulate business models.” She also acknowledged that in the new defined contribution plan world of retirement, the system couldn’t operate without advisors.

Borzi stressed that advisors must be accountable and stand behind their advice. Current rules allow advisors to “walk away” from the advice they provide. Advice should be “ongoing.”

Moreover, Borzi said that when the DOL submits its final proposal to the Office of Management and Budget for regulatory impact analysis, the proposal will attempt “to quantify the cost [to consumers] of conflicted advice.”

OMB will then seek to ensure the rule doesn’t conflict with the rest of the government’s regulatory agenda. The proposal will not be completed in October but will be delayed, perhaps for several months, she added.

The DOL’s initial rule proposal in 2010 raised widespread fears in the brokerage community that increased fiduciary standards could limit Americans’ access to financial advice. Many brokerage firms said the initial rule proposal could force them to “orphan” and refuse to retain millions of small IRA accounts. After the final rule is submitted, it will be open for comment from the public and the industry.

Commissions have been permitted under Erisa regulations since the mid-1980s, but many compensation schemes have emerged that were never envisioned when the law was passed in 1975. Borzi said the final proposal will include at least “one new exemption,” while restructuring others.